Why is the Indian market not afraid of taking military action against Pakistan? Geopolitical tensions do not undermine economic confidence, and investors continue to buy in.

Despite India's recent military strikes in the Pakistan-controlled region and the heightened geopolitical risks, the Indian stock market and financial markets have hardly been significantly impacted. Analysts point out that India's strong domestic demand, reform achievements, and actively promoted international trade agreements have led investors to choose to ignore border tensions and continue to bet on this one of the largest emerging markets in the world.

Geopolitical tensions are rising, yet the market remains as stable as a rock.

India launched airstrikes early Wednesday morning, targeting several sites within Pakistan-controlled areas in response to last month's terrorist attack in the Kashmir region. However, the market showed almost no significant fluctuations. The Nifty 50 and BSE Sensex indices remained flat, indicating that investors currently do not view this military action as a major risk.

Citi's Chief Economist for Emerging Markets, Johanna Chua, pointed out in an investor report: "We believe that despite rising geopolitical tensions, asset prices in India will remain stable." She mentioned the market performance during India's retaliatory actions after the Pulwama attack in 2019, which also did not see any significant capital flight.

India's policy reforms and economic fundamentals support

Mohit Mirpuri, fund manager at SGMC Capital, emphasized that India's structural reforms, strong domestic demand, and solid macroeconomic fundamentals keep the market confident in this emerging economy. He said: "Investors may take a wait-and-see approach for now, but this will not change India's position as a key market for global capital allocation."

Kranthi Bathini, a strategist at WealthMills Securities, pointed out that even though there may be short-term fluctuations, as long as the conflict does not escalate into a full-scale war, the Indian stock market should be able to stabilize quickly. He added, "The key question is whether this will evolve into a full-scale conflict or just a one-time military response."

Progress in international trade protocols stabilizes investment confidence.

In addition to internal economic momentum, India's trade layout on the international stage also plays a key role in market stability. This week, India signed a free trade agreement with the UK and is expected to become one of the first countries in Asia to sign a bilateral trade agreement with the United States in the coming months.

DBS Bank senior economist Radhika Rao stated: "These diplomatic and economic developments provide solid support for Indian assets."

India's exchange rate and bond market reaction is mild.

Despite the event, the rupee depreciated against the dollar by about 0.33%, reaching 84.562, but overall it still fluctuates near a three-month high. The yield on 10-year Indian government bonds slightly declined to 6.339%, indicating that there has not been a significant sell-off in the bond market.

Experts disagree: Will 2019 repeat itself? Or will it escalate further?

Experts have differing opinions on whether this military conflict is similar to past ones. Darren Tay, the risk manager for BMP in the Asia-Pacific region, believes that even though this attack is larger in scale than that in 2019, the situation could still ease within a few months, allowing investors to remain optimistic.

However, Gavekal analysts Tom Miller and Udith Sikand remind us that the current border situation is even more tense. "Compared to 2016 and 2019, the scale and scope of this Indian military action has clearly expanded, which may compel Pakistan to make a 'commensurate' response."

Nevertheless, the two also pointed out: "The calm reaction of Indian asset prices indicates that the market does not expect to fall into an endless cycle of retaliation."

India's latest military action stems from last month's armed attack in Kashmir, which resulted in 26 deaths. Although the situation is still developing, market reactions indicate that investors are more concerned with India's economic growth momentum and progress in international cooperation, rather than short-term geopolitical risks. This also highlights India's strategic position in emerging markets and its confidence in attracting a continuous inflow of global capital.

This article discusses why the Indian market is not afraid of taking military action against Pakistan. Geopolitical tensions do not undermine economic confidence, and investors continue to make purchases. First appeared in Chain News ABMedia.