This report is from the Bulletin “India Inside” of this week’s CNBC that gives you timely and insightful news and market comments on emerging power and large companies behind its meteoric increase. How do you see? You can subscribe here.
The great story
The soldiers of the Border Security Force of India (BSF) are on guard at the entrance of the border post with India-Pakistan Wagah, about 35 km from Amritsar on April 24, 2025. India took a series of punitive diplomatic punitive against Pakistan on April 23, accusing Islamabad of supporting the “transversal terrorism” after a dead attack “after a dead attack” after a dead attack. ” civilians in Kashmir. (Photo by Narinder Nanu / AFP) (Photo by Narinder Nanu / AFP through Getty Images)
Narinder nanu | AFP | Getty images
The Indian stock market has emerged from a few volatile weeks and beyond the level that was before the last outbreaks of India-Pakistan.
However, it should not be a surprise, because for a growing cohort of global investors focused on India, such border crises, although serious, are seen as a single variable in a much more complex equation, for now.
While the Indian stock markets initially fell after it became evident that India and Pakistan were heading towards an armed conflict, Kon Kader, an associated fund manager at the bottom of the Indian subcontinent of Alquity, told CNBC that the episode “would not drastically change the general return profile.”
Instead, the resulting volatility was a “gift for the long -term investor,” Kader added. Bought Nyse-Listed shares Makemytrip, Lemon tree hotels And Samhi’s hotels after they fell, just to see them rise strongly since then.
He is not the only one with that opinion.
Anand Gupta, main portfolio manager for Allianz India Equity Found MSCI India Index seeing only a “modest correction” of around 1.5% despite an increase in the Vix of India, or “fear meter.”
He attributed this to the “trust of investors backed by the strong economic foundations of India” and a “historical pattern of limited interruption of the market during the geopolitical outbreaks of this nature.”
In fact, the risks of recent military outbreaks seem to have been compensated by the fact that India is considered by many as an attractive investment destination. Barclays credit team investigation also noted that the “macro impact is limited for both India and Pakistan” of the recent conflict.
However, although hostilities may not have spooky investors, in the long term, the increase in geopolitical tensions could represent risks.
And this time there have been some surprises in the conflict. The events at the beginning of this month have marked a significant climb of previous skirmishes between the two nations with nuclear weapons. For the first time, both claimed to have attacked territories deeply on the opposite side.
In contrast, Balakot attacks in 2019 saw India reaching places very close to the border. The Indian Air Force remained mainly within India during the 1999 Kargil War. For decades, most of the conflicts between the two remained largely on land.
While investors can be somewhat desensitized for India-Pakistan tensions, the political will to intensify the conflict has generated concerns for some, given the broader geopolitical situation in the world.
“Geopolitically, India is not in a great situation,” said Venugopal Garre, head of research of India in Bernstein, in a note to customers on May 7. He pointed out the change of political position towards India for neighbors Bangladesh and Sri Lanka, and their traditional allies, Russia and Israel. These countries are now busy with the war closer to home. Garre added that China’s support for Pakistan does not help either.
India has a precarious relationship with China, its largest neighbor, which exhibits certain qualities that are similar to their relationship with Pakistan.
China and India share a long border with many points of disagreement that have remained unstable for decades. The two countries also went to war in 1962 for a border dispute. More recently, 20 Indian soldiers were killed in a clash with Chinese forces in a disputed border area of ​​the Himalaya in 2020.
While a real military conflict between the two Asian giants is considered “very, very unlikely” by the Kader of Alquity, admits that such eventuality would be a “very terrifying situation” that potentially requires “global intervention” and significantly raising the risk premium of India.
The scenario is considered to be almost impossible because, economically, the two countries have an interdependent relationship.
Bernstein said: “India needs China to help build its low -end assembly franchise, while China can consider India as a potential market (it executes a large commercial surplus with India that may not want to risk losing).”
Historically, however, India and Pakistan also joined economically and culturally. However, recent events show that when violence explodes, it can be difficult to predict how far each side will get. Investors may want to take note of the risks.
I need to know
Trump does not want Apple construction products in India. The president of the United States said he said Apple The CEO Tim Cook does not want the technological giant to build its products in India, taking photos in the company’s movements to diversify production far from China and urge Pivotar in the United States.
The Indian consumer inflation rate in April cools. The main inflation fell to 3.16% in April from 3.34% in March, and arrived lower than the 3.27% expected by economists surveyed by Reuters. It was the sixth consecutive month that moderate price increases. Food inflation, which is a key inflation metric in the country, submerged 1.78% in April, since the figure of March 2.69%.
Wholesale prices in India also fell. In April, wholesale inflation, which serves as a proxy for producer prices, increased 0.85% annually, much lower than the 2.05% increase the previous month and marking the slowest increase in more than a year. The reading was also less than the 1.76% forecast for a survey of reuters economists. Encourage consumer inflation readings and wholesale open the door to more target cuts by the Bank of the Reserve of India.
India raised the idea of ​​retaliation rates on the United States. Although, according to reports, India is negotiating a commercial agreement with the US, the country in southern Asia, on May 12, proposed to the World Trade Organization that retracts the concessions tariffs on the US. UU.
The high fire between India and Pakistan is fragile but intact. Both countries reached an agreement to stop military action on May 10, but have accused of violating it. That said, the armed conflict has greatly decreased the height of hostilities as of May 6, which India said it was an answer to a militant attack last month in Pahalgam, Jammu and Kashmira, in which 26 people were killed. In a publication about Truth Social, the president of the United States, Donald Trump, offered help to find a “solution” with respect to Kashmir.
What happened in the markets?
He Ingenious 50 The index closed above 25,000 points for the first time since October, as it has been directed for a profit of 4.4% this week. The index has increased 6% this year.
The 10 -year Indian government bond yield decreased to 6.23%, in approximately 10 basic points since last week.
In CNBC TV this week, Shilpak Ambule, the High Commissioner of India to Singapore, said that India will not distinguish between “terrorists and governmental terrorist sponsors”, and argued more thoroughly the perspective of the Indian of his conflict with Pakistan that emerged earlier this month. Ambule emphasized that India is still forging commercial ties with countries such as the United States, the European Union and New Zealand amid its hostilities with Pakistan.
Meanwhile, Mark Mobius, founder of Mobius Investments, said India is the “most exciting place” now because he will replace China in many areas. For example, Apple has already changed some of its manufacturing and export operations to India. Mobius also said that Prime Minister Narendra Modi is doing a good job by crossing the Indian bureaucracy, rationalizing the infrastructure and economy of the country.
What is happening next week?
The commercial balance figures of India, on Friday, will receive more scrutiny than usual, given the emphasis of the president of the United States, Donald Trump, in commercial imbalances between the United States and its partners. Meanwhile, Integrity Infrabuild, a construction company, lists on Tuesday, followed by Accretion Pharmaceuticals on Wednesday.
May 16: India Balance of Trade for April
May 20: IPO of Integrity Developers Infrabuild
May 21: Pharmaceuticals IPO Accretion
May 22: India HSBC PMI Flash Data for May
