According to a note by Axis Mutual Fund, for India, geographically distant but economically exposed, the more relevant question is not whether near-term volatility will increase, but whether such events will change the country’s long-term investment trajectory. History suggests they rarely do.
Wars and geopolitical conflicts usually cause short-term market disruptions, but they do not result in sustained equity underperformance, especially when the conflicts remain regional. Indian markets have shown this resilience repeatedly, absorbing external shocks, briefly reassessing risk and then returning to fundamentals, the note said.
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Recent moves by the United States and Israel to target Iranian targets have created a “risk-off” mood among investors, with money flowing away from riskier assets such as equities and into safer assets such as gold, silver and government bonds.
The conflict has raised the price of traditional safe havens. Precious metals such as gold and silver rose as many investors sought protection from market volatility.
Shrikant Chauhan, head of equity research at Kotak Securities, told ETMutualFunds that the market appears to be directionless at the moment, making it difficult to predict the short-term trend. Markets generally don’t like uncertainty, and prevailing global concerns keep sentiment volatile. From a 12-month perspective, current levels look attractive for investing in large-cap stocks.
While investors rarely end up right, adopting a surprise investment strategy during a major downturn can help make sense. A gradual accumulation at lower levels increases the potential for alpha production over the medium to long term, Chauhan added.
A note by Axis Mutual Fund highlighted that oil is the most immediate transfer mechanism. India imports more than 80% of its raw materials, making it vulnerable to Middle East instability. A sharp rise in crude oil prices raises product costs, widens the current account deficit and boosts inflation.
Equity markets reacted quickly, especially in oil-sensitive sectors such as aviation, paints, cement and chemicals. However, history shows that oil shocks alone did not knock India’s economy off its feet unless they persisted long enough to damage growth and monetary stability.
Nehal Meshram, senior analyst at Morningstar Investment Research India, said mutual fund investors should stick to long-term goals and avoid reactive portfolio changes based on short-term market movements. During this period, it is necessary to stick to long-term asset allocation across equity, debt and gold.
“Avoid panic selling in equities, as this often leads to stop losses before markets stabilize. For investors with ongoing SIPs and long horizons, it makes sense to continue investing steadily.”
Meshram added that investors should focus on portfolio quality rather than short-term tactical trading. If markets correct further, consider a gradual rebalancing rather than trying to do it all at once. Diversifying a portfolio to large-cap, flexi-cap or multi-cap funds can help manage downside risk. One should avoid over exposure to small cap or narrow sector issues during such volatile period.
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Periods of geopolitical stress typically strengthen the US dollar, putting pressure on emerging market currencies, including the rupee. A note by Axis Mutual Fund showed how Nifty has behaved over the past 15 years during conflict-stressed events such as the Arab Spring or Middle East unrest (2011), surgical strikes (2016), Russia-Ukraine war (2022), Israel-Hamas war (2023), and operations (2055).
During the Arab Spring or Middle East unrest in 2011, it was a volatile year, with global growth fears more than geopolitics, and markets rebounded as domestic fundamentals stabilized. Amid the Russia-Ukraine war in 2022, the Nifty 50 fell 5% on the day of the invasion but ended the year in positive territory, despite oil shocks and aggressive global price hikes.
At the time of Sindur’s operation in 2025, initial market volatility has given way to stability as upside risks remain, reinforcing the market’s tendency to seek short-term uncertainty.
The note said the pattern is consistent: declines due to conflict are small and temporary, while long-term returns are determined by income growth, liquidity and domestic demand.
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Anshi Shrivastava, head of personal finance coaching at 1Malaya, told ETMutualFunds that given the current market volatility due to global conflicts, Indian investors should remain calm and focus on long-term investment goals. Mutual funds typically experience only brief declines before recovering.
While sharing how benchmark indices have performed around various geopolitical events, Shrivastava said that for mutual funds, keeping an investment horizon of 10-15 years is important to achieve desired growth. Currently, adding gold and silver to the portfolio is advisable.
((rejection: The recommendations, suggestions, opinions and views given by the experts are their own. (It does not represent the views of The Economic Times.)
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