Stock bulls in India, Pakistan anticipate rebound after truce
Foreign investors, who had been on a 16-day buying streak in Indian shares until the clashes flared up Friday, may resume flows as
volatility
subsides. Meanwhile, in Pakistan, the International Monetary Fund's approval of $1 billion in immediate disbursement along with a new $1.4 billion plan for climate resilience will be a booster for its fragile finances.
'Short covering and deployment of idle funds will lead to a spike in broad
markets
on Monday,' said Mumbai-based Abhay Agarwal, chief investment officer at Piper Serica Advisors Pvt. 'The focus should shift back to fundamentals.'
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Investors had been nervous. India's NSE Nifty 50
Index
slid more than 1% on Friday — its steepest fall in over a month — while the rupee was one of Asia's worst performers last week. Bond yields crept higher as risk premiums widened, although
debt
purchases by the Reserve
Bank
of India helped limit the declines. Pakistan's key stock index is down 9% since the April 22 attack in Kashmir, which prompted India to retaliate.
India's bonds and foreign currency markets are closed on Monday for a public holiday.
With the immediate geopolitical risks easing, investors are expected to pivot to positive signals in India, including hopes for an early US trade deal, ample liquidity, and expected rate cuts by the RBI. In Pakistan, traders anticipate a relief rally, as border tensions overshadowed a surprise interest-rate cut by the State Bank of Pakistan and prospects for additional IMF funding.
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'Assuming nothing changes from today onward, I see the Pakistan
stock market
hitting a 5% upper circuit,' said Mohammed Sohail, chief executive at Karachi-based Topline Securities Ltd.
Still, the threat of renewed tensions remains, as India has yet to lift its abeyance on the Indus Water Treaty — a move that could harm a large part of Pakistan's farm output. Meanwhile, a top Indian diplomat said that Pakistan violated the truce just hours after it was declared, a claim Pakistan has denied.
'There is still some uncertainty around the pause in fighting and the language from both sides will be important to monitor going ahead,' said Tejas Shah, head of
derivatives
trading at Equirus Securities. 'I don't think we will see a 4-5% move in the Indian market Monday. If we do, some investors will come in to book profit.'
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