Stock market trading was stopped for an hour at the Pakistan Stock Exchange (PSX) on Thursday after its main index fell sharply. The sudden drop came as panic spread in the market following reports that drones had been shot down in major cities, including Karachi and Lahore.

According to the official notification from the exchange, trading was paused after the benchmark index plunged 6.3% in a short period. The sharp fall triggered automatic circuit breakers to stop further decline.

Market experts said that selling pressure increased after reports emerged that Pakistani military had shot down 12 drones from India. The military claimed these drones had entered Pakistan’s airspace a day after India carried out missile strikes on terror targets inside Pakistan and Pakistan-occupied Kashmir under “Operation Sindoor”.

Adnan Sheikh, Head of Research at Pak Kuwait Investment Company, said, “Reports of drones being shot down in major cities including Karachi and Lahore pushed the market down more than 6% in a short span of time, triggering a halt.”

Pakistan’s stock market had already been under pressure due to tensions with India. On Wednesday, the market had opened lower and later closed down by 3.1% after falling nearly 6% during the day. This marked one of the biggest drops in recent months.

Not just stocks, Pakistan’s international bonds also came under stress. Trade data showed that the 2036 bond maturity fell by more than 1 cent, now trading at 73.8 cents on the dollar. Investors pulled back fearing a wider conflict between the two neighbouring countries, both of which have nuclear weapons.

Jim Reid, global head of macro and thematic research at Deutsche Bank, said in a note, “The situation has raised fears about an escalation between the two countries. It also shows how the Global South is likely to become more important for the global backdrop.”

The Sensex was down by around 138 points on Thursday. However, analysts said the Indian market was relatively calm compared to Pakistan. The Indian markets did not face the same level of selling pressure, and analysts pointed out that investors are more focused on economic data and corporate results.

India’s recent military action came after a terror attack in Pahalgam, Jammu and Kashmir, that killed 26 civilians in late April. In response, India launched missile strikes on nine locations inside Pakistan and Pakistan-occupied Kashmir. The areas reportedly targeted included Bahawalpur, Kotli, Muzaffarabad, Muridke, Gulpur, Bhimber, Bagh, Chak Amru and Sialkot.

The Indian government also held an all-party meeting on Thursday to brief leaders about the success of Operation Sindoor. Defence Minister Rajnath Singh told the leaders that at least 100 terrorists were eliminated. However, he said further details would be shared later as the operation was still ongoing.

Last month, Pakistan’s market had also suffered a major crash. The benchmark index had fallen by more than 8,700 points following an announcement by former US President Donald Trump about new trade tariffs. That crash had also led to a temporary trading halt.

Analysts believe that the current market situation in Pakistan is likely to remain unstable in the short term. Many fear more strikes or military action could take place, which may lead to further market drops.

Compared to Pakistan, analysts said India’s market is in a better position. The Indian economy has shown stronger signs of recovery, and investor interest remains steady due to strong corporate earnings and trade deals.

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