Bears took control of the trade floor as shares at the Pakistan Stock Exchange (PSX) plunged by more than 3,500 points — a development that analysts attributed to investor anxiety over potential Indian military action against the country.

The benchmark KSE-100 index decreased by 1,717.35 points, or 1.5 per cent, to stand at 113,154.83 from the last close of 114,872.18 at 9:53am.

At 10:38am, the index declined by 2,073.42 points, or 1.8pc, from the last close.

By 1:50pm, more selling pressure ensued at the stock market as the KSE-100 index plunged by 3,255.42 points, or 2.83pc, from the last close.

Finally, the index closed at 111,326.57, down by 3,545.61 or 3.09pc, from the last close of 114,872.18.

Mohammed Sohail, chief executive of Topline Securities, attributed the decline to “news of likely attack in next few days”.

Awais Ashraf, director research at AKD Securities, said, “Investors are worried about potential Indian military action against Pakistan, concerns that have intensified following the information minister’s press briefing.”

Yousuf M. Farooq, director research at Chase Securities, echoed the same sentiments.

He said that the market was under pressure following the information minister’s “statement last night suggesting that India may take military action within the next 24–36 hours”.

“The market in the short term will most likely follow newsflows of Pakistan-India tensions,” he added.

Sana Tawfik, head of research at Arif Habib Limited, also credited the slump primarily on geopolitical tensions between India and Pakistan.

Earlier in the day, Information Minister Attaullah Tarar said that “credible intelligence” reports indicated that India was planning to conduct a military action against Pakistan in the next 24 to 36 hours amid tensions between the two countries after the Pahalgam attack in occupied Kashmir last week that New Delhi blamed on Islamabad, albeit without proof.

On Tuesday, India gave its military “operational freedom” to respond to the Pahalgam attack.

Speaking to the media hours after the development, Tarar said: “Pakistan has credible intelligence that India intends carrying out military action against Pakistan in the next 24-36 hours on the pretext of baseless and concocted allegations of involvement in the Pahalgam incident.”

He said Pakistan vehemently rejected “Indian self-assumed hubristic role of judge, jury and executioner in the region”, adding that it was completely “reckless”.

Yesterday, the KSE-100 index had bounced back on the trading floor after the International Monetary Fund (IMF) confirmed that the Fund’s Executive Board will meet on May 9 to discuss the country’s staff-level agreement for a new $1.3 billion arrangement under a climate resilience loan programme, along with the first review of Pakistan’s ongoing $7bn bailout programme.

Pakistan dollar bonds drop amid rising tensions

Pakistan’s international bonds dropped more than 1 cent after the information minister’s statement.

The 2036 bond suffered the biggest decline, falling 1.3 cents to be bid at 71.85 cents in the dollar, Tradeweb data showed, though bid-ask spreads of around 1 cent pointed to limited liquidity.

Indian shares flat as HDFC Bank offsets Bajaj Finance losses, Pakistan jitters

Meanwhile, Indian shares were muted as gains in heavyweight HDFC Bank helped offset pressure from tensions with Pakistan, while Bajaj Finance declined despite posting a rise in fourth-quarter profit.

The Nifty 50 was down 0.05pc at 24,324 and the BSE Sensex lost 0.07pc to 80,236.6 as of 10:43am.

Both benchmarks swung between 0.2pc gains and 0.2pc losses in early trade.

“For now, geopolitical tensions (with Pakistan) have overtaken (US) tariffs in investors’ minds,” said Anita Gandhi, founder and head of institutional business at Arihant Capital Markets.

Indian Prime Minister Narendra Modi granted military chiefs freedom to respond to last week’s attack in Pahalgam, Reuters reported on Tuesday.

The Nifty volatility index has risen in five of the six sessions since the attack.

Six of the 13 major sectors declined on Wednesday, while the small- and mid-caps fell 0.6pc and 0.1pc, respectively.

Non-bank lender Bajaj Finance fell 5.4pc, leading losses on the Nifty, despite posting a higher quarterly profit, as brokerages flagged weak pre-provision profit and higher credit costs as negatives.

Additional info from Reuters.