KARACHI: The stock market on the I.I. Chundrigar Road in Karachi and the one on Dalal Street in Mumbai were the generally unnoticed casualties of Thursday’s early morning skirmishes along the Line of Control, which Pakistan and India loved to term differently — normal cross-border firing and surgical strikes.

India’s broader National Stock Exchange was down 1.8 per cent after falling as much 2.1 per cent to its lowest since Aug 29.

The Pakistan Stock Exchange’s (PSX) benchmark 100-share index closed on a relatively lower loss of 59.5 points, or 0.15pc. The index had spiralled down by 0.52pc as individual investors ran to book profit following the news of a flare-up in hostilities.

The market started on a massive rally pushing the stock prices up by 1.3pc to an all-time high, mainly as the index heavyweight oil exploration and production (E&P) stocks soared on news of Opec’s decision to cap oil production, a move that caused international oil prices to trade comfortably above $46.5 a barrel.

“The E&P stocks which remained in the green until the end salvaged the situation at the PSX, since they carry a heavy weightage in the 100 shares that form the benchmark KSE index,” said former PSX chairman Arif Habib.

Although mutual funds, banks and companies kept their cool, the panic was seen among the small shareholders who watched the board and were unable to decide whether to hold on or liquidate their positions.

“Cross-border firing is a norm and no-one seriously believes that a full-fledged war is near at hand,” said a fund manager. However, the situation would be clearer when the dust hopefully settles on Friday, he added.

On the PSX, Pakistan Petroleum rose 2.88pc, the Oil and Gas Development Company 2.04pc and Pakistan Oilfields 4.34pc, contributing 111 points towards the index. Other major gainers were Habib Bank (up 0.77pc), MCB Bank (1.06pc) and Indus Motors (3.65pc); they contributed 21 points, 19 points and 13 points, respectively.

The day’s laggards were United Bank (down 1.26pc), Searle Pakistan (3.62pc), Engro Pakistan (1.20pc) and Fauji Fertiliser (1.20pc), all of which cumulatively took 81 points off the index.

Due to intense volatility, volumes jumped to 712m shares on Thursday from 435m shares a day ago. Small-cap stocks once again dominated the volumes chart. Trading value rose to Rs21.4bn from Rs13.7bn.

Reuters adds: Indian benchmark 10-year bond yields were up 10 basis points to 7.02 percent from its previous close, while the rupee weakened to 66.89/89 from its close of 66.46 on Wednesday.

“Markets will closely watch the next few days for further developments. Any such conflict creates uncertainty in the investment climate,” said Shubhada Rao, chief economist at YES Bank in Mumbai. “But it is premature to talk about serious war.”

Analysts in both countries expect tensions would eventually ease given the stakes involved. “The consensus is that it’s not going to lead anything crazy like a war, but it’s bad for sentiment,” said Gohar Rasool, head of sales for Karachi-based Intermarket Securities.

Published in Dawn, September 30th, 2016