FxWirePro: India’s military strike along Pakistan border makes local market very volatile

The very possibility of an escalation to a full-blown along the border triggering massive volatility in Indian markets, after an early morning strike along the line of control in the disputed region of Kashmir.

What happened?

• According to the Indian government, India carried out non-military, pre-emptive air strikes across the line of Control early this morning to target the Pakistan-based terror group Jaish-e-Mohammed, which was planning more attacks in the country after Pulwama terrorist attack, and subsequent attacks in the region that killed more than 50 paramilitary troops.
• Twelve Mirage 2000 jets dropped 1,000 kg bombs on the terror training camp of the Jaish-e-Mohammad, which had claimed responsibility for the Pulwama terror attack.
• India’s foreign secretary said that Pakistan must honor its 2004 vow to not to harbor terrorist group on its soil and act swiftly to dismantle any groups planning attacks on India.

Market reaction:

• Market greeted the news with extreme volatility.
• The Indian rupee, which was trading 70.8 per USD during the New York session on Monday, declined to 71.2 per USD as markets opened in India. The INR declined further to 71.34 per USD in the first half an hour of trading, only to decline to 70.98 in the next two hours. The rupee is currently trading at 71.08 per USD.
• Similar volatility was seen in the benchmark stock index; Nifty 50. The index opened at 10775, down 105 points from yesterday’s close, and declined further to as low as 10735; only to recover to 10860 as of now.

The markets would remain volatile and focused on local news in the coming days as the possibility of an escalation to a greater conflict can’t be ruled out.