No contest between India and Pakistan markets amid geopolitical tensions

At least 15 Indian companies individually surpass Pakistan's entire market cap, with Reliance Industries alone valued at five times Pakistan's total

Amid recent geopolitical tensions, the Indian and Pakistani stock markets have moved in tandem in the past few days. However, Pakistan’s market pales in comparison to India’s, which remains in a league of its own. India’s market capitalisation (mcap), which stands at $5 trillion, is the world’s fifth-largest and operates on a vastly different scale than Pakistan’s.  At least 15 Indian companies individually surpass Pakistan’s entire mcap of $46 billion, with Reliance Industries alone valued at five times Pakistan’s total. Over the long term, Pakistan’s stock market has significantly underperformed India’s.  Despite a 60 per cent surge in the KSE-100 index over the past year, driven by improving economic indicators, it trades at a modest price-to-earnings (P/E) ratio of under 6x.  In contrast, India’s Nifty 50 commands a P/E of 22x. Similarly, India’s price-to-book ratio is 3x, while Pakistan’s stocks hover near book value. Pakistan’s low valuations are also an indication of lack of depth and weak investor pool. 

 

Pak’s KSE-100 surges 9%

 

The Pakistan Stock Exchange (PSX)’s KSE-100 on Monday gained a record 9 per cent  in trading, as India and Pakistan reached an understanding to halt all military actions. This was its sharpest single-day gain in 26 years. The index opened with a gain of 9,929.48 points, or 9.26 per cent, to stand at 117,104.11 points from the previous close of 107,174.63. 

Due to the massive gains, the PSX was suspended for an hour after opening to control excessive volatility. 

The understanding reached between the two countries “has apparently boosted investor’s mood and confidence,” said Fatima Bucha of AKD Securities. 

Last week, the PSX lost nearly 6.5 per cent due to the conflict.