CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

India-Pakistan conflict leaves Nifty exposed

Indian Nifty market at risk as a conflict between India and Pakistan threatens to turn into something much more serious.

Tensions between India and Pakistan have ramped up this week, as a tit-for-tat conflict between the two sides raises fears over a wider clash between the two neighbours over the disputed Kashmir region.

Kashmir has been a huge cause of friction between the two nations since India was split up by the British in the 1940s, with both laying claim to their own areas of this mountainous region. As things stand, Kashmir is split between areas of Indian, Pakistani, and Chinese control. Conflict in the region has been a constant feature, yet since peaking in early 2000s, we saw a significant decline over the years.

However, tensions in the region has been ramped up since a suicide bomber killed 40 Indian paramilitary police officials almost two weeks ago. This spurred on yesterday’s attack from the Indian airforce, with bombs being dropped on a perceived terrorist camp. Finally, we have now seen retaliation from Pakistan, with two Indian jets being shot down and videos circulating of the pilots being physically mistreated.

The question many will wonder is why this matters for financial markets. For many main markets it will not, with the likes of the FTSE 100 and Dow Jones unlikely to sell off as a result. However, with two nuclear nations increasingly shifting towards waging war in one form or another, there is certainly a risk that traders will want to move their money out of the area until we see some clarity on the issue.

Indian stocks have certainly responded to those two recent attacks, with sharp declines seen in the immediate aftermath of each attack. However, we are yet to see a definite sell signal come into play, with a break below the latest swing low (10,721) required to provide a bearish sell signal.

On the wider daily chart, it is evident that the market seems to be rolling over, with a rising wedge formation pointing towards a potential breakdown. The respect on trendline resistance this week alludes to a likely period of weakness over the short term, with a break below 10,590 providing a key bearish signal for the coming weeks.

Ultimately, with tensions between India and Pakistan peaking after decades of relative calm, markets are understandably at risk in the region. With relations in limbo, the decision to escalate or deescalate will be key in determining how stocks move from here.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 40
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. All share prices are delayed by at least 20 minutes. Prices are indicative only.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.