Pakistan Stock Market In Free Fall, Erased Rs 820 Billion; Karachi's KSE 100 Nosedives By 16% From April Peak

Pakistan Stock Market: The Pakistani stock exchanges are in a free fall to volatile trading sessions since the country erupted into a war-like situation with India. On May 9th, the Karachi Stock Exchange dropped by 1,106 points before picking up marginal gains.

But despite slight buying, the KSE 100 index is down by 16% from its April record. Till May 8th, it was reported that as much as Rs 820 billion worth of investors' wealth had been eroded in Pakistan's stock market.

From a conflict perspective, India has an upper hand over Pakistan, which has turned investors' sentiment bearish in Pakistani stocks.

"One, the conflict, so far, has demonstrated India's clear superiority in conventional warfare, and therefore, further escalation of the conflict will inflict huge damage to Pakistan," Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited said.

Karachi Stocks:

After halting trade on May 8th, the Karachi 100 (KSE) exchange opened at 105,133.52 on May 9th, which was higher than the previous session's 103,526.82. But soon after investors turned jittery, pushing the KSE to hit an intraday low of 102,420.82, which was down by 1,106 points from the previous day.

At the time of writing, the exchange-traded at 103,666.38, in a gap-up movement. It gained by over 200 points or 0.20%.

However, despite the latest surge, the KSE 100 index is down by nearly over 15.2% from its record high performance of 120,796.67 that it touched in early April. Till May 8th, the selloffs led KSE to fall by 16% from its record performance.

Reports of explosions in Lahore one day after Indian air strikes in Pakistani territory, claimed to be terrorist infrastructure by New Delhi, drove Pakistan to vow retaliation and ramp up fears of a war between both countries. The risk of an escalated conflict coincided with signs that the Pakistani economy was on the road to recovery from its crisis, while the government attempted to shore up finances and progress on the $7 billion loan by the IMF last year. Still, stocks in multiple sectors recovered from session loans ahead of the IMF's decision on a possible extension to the country's debt payment, as per Trading Economics data.

Pakistan Stock Exchange (PSX):

Data from the report of DAWN revealed that the Pakistan Stock Exchange (PSX) recorded its largest-ever plunge on May 8th, resulting in an erosion of nearly Rs 820 billion in equities. This comes after India launched drone attacks in major cities including Karachi and Lahore.

Further, the report highlighted that the Pakistani market has erased as much as Rs 1.3 trillion as investors carried panic selling.

Also, PSX's official website is not reachable. Upon opening the Pakistan Stock Exchange, visitors see a message saying, "We'll Be Back Soon."

It added, "PSX website is under maintenance until further notice."

PSX was first founded in 1947 as Karachi Stock Exchange. However, decades later, the name was changed back to the Pakistan Stock Exchange after the Lahore Stock Exchange and Islamabad Stock Exchange were merged.

Investors on the exchanges include 1,886 foreign institutional investors and 883 domestic institutional investors along with about 220,000 retail investors. There are also about 400 brokerage houses which are members of the PSX as well as 21 asset management companies, as per Wikipedia.

Why Pakistan Could Suffer More From War With India?

The reason behind lack of faith in Pakistani shares is because its economy is already shrinking and a war with India could further deepen the country's woes.

A data released by Atlantic Council in April 2025, said, "Over the past half century, Pakistanis' standard of living has declined precipitously relative to their South Asian counterparts. Galloping population growth and poor economic policy management are to blame. Population expansion has depressed saving and investment, which, in turn, has hamstrung economic growth. Meanwhile, the government has run up public debt by persistently failing to live within its means, so much so that interest on that debt now eats up almost two-thirds of public revenue and leaves little to spend on essential items. Economic policymakers' preference to keep imports cheap-via an overvalued exchange rate while running up external debt-has made the economy uncompetitive and caused frequent crises."

The report also said, "Pakistan's economic performance over the past fifty-five years has been dreary compared with that of its neighbors, in terms of both economic well-being and socio-economic attainment. In the early 1970s, the average Pakistani's income was higher than that of the average Sri Lankan, and almost one and a half times that of the average Bangladeshi or Indian."

Pakistan's economy is already expected to take massive hit from US tariffs. IMF trimmed its GDP growth forecast to 2.6% for current fiscal, compared to its earlier 3% forecast. US has slapped about 29% tariff on Pakistan, compared to 26% on India.

India is expected to be least impacted from US. Also, India has been exchanging trade talks with USA, and both parties have shown positive responses on working towards trade deals that could benefit both.