The recent escalation in tensions between India-Pakistan has sent shockwaves through financial markets impacting everything from gold prices to travel stocks like MakeMyTrip. The conflict sparked by a terrorist attack in Pahalgam on April 22, 2025 which killed 26 people led to India’s military response codenamed Operation Sindoor. This operation involved precision strikes on terrorist targets in Pakistan and Pakistan occupied Kashmir (PoK). As a result investors are reacting to the uncertainty causing significant market movements.
Why Gold Prices Are Soaring
Gold is often called a “safe haven” asset because investors turn to it during times of uncertainty. When conflicts like the India-Pakistan tensions arise people worry about economic and political stability. This fear drives them to buy gold pushing its price higher. On May 8, 2025 gold prices in India crossed Rs 1 lakh per 10 grams a significant jump from Rs 99750 the previous day. This surge was triggered by reports of Indian missile strikes on terrorist targets which heightened fears of a broader conflict.
According to market experts gold’s appeal grows when global and regional tensions increase. Chintan Mehta CEO of Abans Financial Services noted that ongoing conflicts in the Middle East Ukraine and now between India and Pakistan make gold a reliable hedge against uncertainty. The US Federal Reserve’s decision to maintain interest rates also supports gold’s attractiveness as low rates reduce the cost of holding non yielding assets like gold. For ordinary investors this means gold is seen as a safe bet when the world feels unstable.
Indian Stock Markets Take a Hit
The Indian stock market has shown resilience in the past during India-Pakistan conflicts such as the Kargil War in 1999 where it only declined by 0.8%. However the current situation has caused more noticeable turbulence. On May 8, 2025 the Sensex dropped by 411 points (0.51%) to close at 80334 and the Nifty fell by 140 points (0.58%) to 24273. The decline was sharp in the final hours of trading after news of India neutralizing Pakistani military targets surfaced.
Mid cap and small cap stocks faced heavier losses with the Nifty Midcap 100 falling 1.95% and the Nifty Next 50 dropping 2.14%. Sectors like realty, metals and auto saw significant selling pressure. The India VIX a measure of market volatility jumped 10.21% to 21.01 reflecting growing investor anxiety. The Indian rupee also weakened falling 89 paise to 85.72 against the US dollar its worst single day drop since February 2023.
Despite these declines some analysts remain optimistic. They point out that India’s economic exposure to Pakistan is minimal and the country’s strong reserves and fundamentals provide stability. Historical data suggests that Indian markets tend to recover quickly from such geopolitical shocks especially when the conflict is focused and non escalatory as Operation Sindoor appears to be.
Travel Stocks Like MakeMyTrip Crash
The travel and tourism sector has been hit hard by the tensions. MakeMyTrip a leading online travel company saw its stock crash by about 10% on May 8, 2025 due to fears of reduced travel demand. The conflict has led to heightened security measure including the closure of 25 flight routes to Pakistan and the cancellation of 140 flights at Delhi airport. These disruptions have made travelers cautious impacting bookings and revenue for companies like MakeMyTrip.
Airline stocks also took a beating. InterGlobe Aviation (IndiGo) fell by 4% and SpiceJet slipped by 3.7%. The closure of tourist zones in Kashmir and school shutdowns in border areas have further dampened tourism prospects. For travel companies the uncertainty surrounding the conflict makes it hard to predict when demand will recover leading investors to sell off these stocks.
What Should Investors Do?
For investors the current situation can feel overwhelming but experts advise staying calm. Dr. VK Vijayakumar from Geojit Financial Services suggests that while short term market jitters are normal the medium term outlook for the Indian economy remains strong. Factors like the recently concluded UK trade deal and progress on a US trade agreement are positive for investor confidence.
Those holding gold may benefit from the ongoing uncertainty but analysts warn against buying at peak prices. For stock market investors focusing on quality companies with strong fundamentals is key. Sectors like IT and media which remained relatively stable during the recent market decline could be safer bets. Travel stocks like MakeMyTrip may face challenges in the short term but a resolution to the tensions could lead to a rebound.
Looking Ahead
The future of India-Pakistan tensions is uncertain and much depends on Pakistan’s response to India’s actions. If the conflict remains limited Indian markets are likely to stabilize as they have in the past. However a prolonged standoff could hurt capital inflows and economic growth as warned by Vineet Arora from NAV Capital. For now investors are closely watching diplomatic and military developments.
In conclusion the India-Pakistan tensions have created a ripple effect across financial markets. Gold prices are soaring as investors seek safety while Indian stock markets and travel stocks like MakeMyTrip are facing declines. By staying informed and focusing on longterm strategies investors can navigate this period of uncertainty with confidence.