India-Pakistan border tensions: Should you stay invested or sit on cash?

Market experts believe that short-term volatility is likely to persist for some more time, but as the border situation de-escalates, sentiment should revive.

Attempts to escalate border tensions by Pakistan after India’s 'Operation Sindoor' against terror sites across the border have cast a shadow on near-term investor sentiment, at a time when equities are navigating through tariff-related uncertainties and the impact of fourth quarter earnings.

Market experts believe that short-term volatility is likely to persist for some more time, but as the border situation de-escalates, sentiment should revive. The key question for investors now is if there is a meaningful downside ahead, and should one stay invested, or raise cash levels?

Follow latest updates on India-Pakistan border tensions.

Market expert Sunil Subramaniam has cautioned over attempts of a short-term selling pressure in the equity market. “There is a fight between short-term hedge funds and long-term investors like sovereign wealth and pension funds. Hedge funds, having entered the market on tailwinds such as softening crude prices and rate-cut expectations in the US, are now booking profits. Meanwhile, long-term investors are stepping in, creating a balance. However, there could be intensified selling by shorter-term investors,” said Subramaniam. He added that the duration of market volatility will depend on how long do the longer-term players wait for better valuations, before deciding to re-enter equities.

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For those who are fully-invested, Subramaniam advised against sitting on cash. “Hang in there and avoid panic selling unless there’s a need for money,” Subramaniam said. Those holding cash should deploy it gradually into quality largecap stocks and even larger midcaps, which tend to offer better resilience and recovery potential, the market expert added. Subramaniam said he finds BFSI and consumer discretionary as attractive opportunities, supported by falling oil prices and a dovish RBI.

Anand Rathi of MIRA Money has recommended to avoid any tactical moves in the market right now. “Take strategic calls. Allocate more to large caps and add debt, as interest rates can fall by 1%. It diversifies and could deliver equity-like returns,” said Anand Rathi.

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Nirav Karkera of Fisdom Research suggested keeping some cash ready to plough into shares, in case of any sharp decline. “Macro disruptions create micro-opportunities,” Karkera said, advising investors to keep cash ready to deploy during dips, fearing the worst may not be over yet, given the evolving nature of border tensions.

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