Escalating tensions between Pakistan and India have taken a sharp toll on the Indian economy, as per reports from Reuters news agency. Indian investors have lost $83 billion in two days amid uncertainty on financial markets.
The Indian share market fell 1.3 percent over one week, an indication of deepening fears of regional instability and possible economic impact of the diplomatic standoff.
In total, Indian investors have lost a combined $108 billion, Reuters says, noting the high economic price of the enduring tensions between the two neighboring nuclear powers.
The tensions between the nuclear-armed neighbors escalated after India attacked suspected “terrorist infrastructure” targets in Pakistan on Wednesday in retaliation for a fatal attack in Indian-held Kashmir last month. Pakistan retaliated with cross-border attacks, and fighting has been ongoing since.
Sensex, Nifty Slide as War Fears Shake Investor Confidence
The benchmark Nifty 50 index fell 1.1%, although it was able to close above the crucial 24,000 level. The BSE Sensex was also down 1.1%, falling below the 80,000 level, it had held the previous day. At one stage in the session, losses were set to reach $108 billion before easing somewhat.
Markets were already down 0.5% on Thursday, and the decline on Friday meant that leading indexes posted a 1.3% drop for the week — closing out their longest weekly winning streak in 2025.
“Sentiment is dominating fundamentals at present,” said Profitmart Securities’ research head Avinash Gorakshaka. “In the event that hostilities become even more elevated, the markets may experience sustained volatility and weakness.”
India’s volatility index (.NIFVIX), also known as the ‘fear gauge’, jumped for an eighth consecutive session to a record high in over a month. The central bank meanwhile intervened to contain a steep fall in the rupee.
Losses were broad-based, with 12 of the 13 major sectoral indices declining. Small-cap and mid-cap indexes also fell sharply, by 1.9% and 0.8% respectively.
One of the few bright spots was the auto industry, led by Tata Motors’ 8.7% gain on hopes that the UK-US trade deal would help its British unit, Jaguar Land Rover. Tata Motors was the leader among the 11 Nifty 50 gainers this week.
The ongoing T20 cricket tournament of the Indian Premier League faced disruption as officials stopped a match midway on Thursday due to the unrest.
