Here's how equity markets, GDP have navigated wars

As India’s forceful response to Pakistan’s escalations enters its fourth day, a look back at history suggests that while past wars have had minimal lasting impact on domestic equity markets, the country’s economic growth has often borne the brunt of such conflicts.

On Friday, Nifty ended with sharp cuts of 1.1% at 24,008 while falling 1.5% since India struck terrorist infrastructure in Pakistan and Pakistan Occupied Kashmir (PoK) on May 7 to avenge the Pahalgam attack. Things are now changing thick and fast.

In its analysis of the market movement and the GDP, brokerage firm JM Financial explains the impact of previous wars and how the situation is different this time around.

Here is the full break-up of events and their impact:

Kargil War – A full-scale war that was fought between May 3, 1999 and July 26, 1999, Nifty jumped 7% at the end of the third-day into the war. By the end of the war, the headline index galloped 35.6%.

Parliament attack: This happened on December 13, 2001 and was followed by a border stand-off that lasted till June 19, 2002. Nifty fell 1.8% over three sessions while plunging 4% by the end.

26/11 Mumbai Attacks: The attack happened on November 26, 2008, and the tension lasted till November 29, 2008. The Nifty index was up 3.8% over the span of the operations.

Uri Attack + Surgical Strikes: The events unfolded between September 18, 2016 and September 28, 2016, and Nifty remained flat over the first three sessions while declining marginally by 0.4% by the end of operations.

Pulwama Attack + Balakot Airstrike: The events unfolded between February 14, 2019 and February 26, 2019. Nifty declined 0.6%, three days after the attack while gaining by 0.4% by the end of the operations.

Pahalgam Attack: The attack happened on unsuspecting civilians on Apr 22, 2025. While the story is still ongoing, the Nifty jumped 1.7% at the end of the third day of the incident. As on Friday, Nifty was still up 0.6%.

Nifty was launched in 1995 and India fought four wars prior to Kargil war viz. first Kashmir war which started on October 22, 1947 and ended on January 1, 1949; the second Kashmir War between July 5,1965 and September 23, 1965, Indo-China war of 1962 and Bangladesh Liberation War between December 3, 1971 to December 16, 1971.

Impact on GDP


During the Indo-China war of 1962, GDP saw a decline of 0.8%, JM said, while highlighting that similar trends were witnessed post the Indo-Pak war in 1965, wherein GDP declined 2.6% in 1965 after a growth of 7.5% in the preceding year. During the 1971 war, while a GDP decline was not seen, the growth fell to 1.6% from 5.2%, this brokerage said.

The 1999 Kargil war appears to be the only situation wherein the year of war saw an increase in GDP growth (8.9%) as compared to 6.2% in 1998.

While the GDP has been adversely impacted, JM said that the Indian economy now is far larger and more resilient than what it was during previous conflicts.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)