Even as geopolitical tensions rise between India and Pakistan, leading experts believe that the impact on the market is expected to be minimal as much of the developments were priced in and empirical evidence also showing that markets do not get significantly impacted by such escalations.
“From a market point of view, I do not think this should be looked as a negative because whatever will happen was broadly priced in and market was already prepared for it,” said A. Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC.
“Also, if you see such instances in the last few years, those were not major threat to the economy as such,” he added.
Indian armed forces launched Operation Sindoor in the early hours of Wednesday in retaliation to the Pahalgam terror attack where 26 people were killed on April 22. India carried out missile strikes on nine terror targets in Pakistan and Pakistan-Occupied Kashmir (PoK) including the Jaish-e-Mohammad headquarter of Bahawalpur and Lashkar-e-Taiba's base Muridke.
Indeed, historical data over the past two decades suggests that markets often recover quickly, or are even unaffected by such incidents over the long-term.
On February 26, 2019, when the Indian Air Force conducted air strikes on terrorist camps in Balakot, the Sensex fell by 239 points while the Nifty lost 44 points. However, the following day, markets bounced back as Sensex opened with a gain of 165 points and eventually closed flat.
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After the Pulwama attack in 2019, markets saw a mild reaction, dropping just 0.2 percent during the February 15 session. In contrast, the 2016 surgical strikes following the Uri attack saw a sharper fall, with the Sensex dropping over 400 points and the Nifty down by 156 points.
During the 1999 Kargil conflict, the Sensex and Nifty each gained around 33 percent. Over the three-month war period, the Sensex surged 1,115 points, while the Nifty climbed 319 points.
Meanwhile, the veteran fund manager further added that a knee-jerk reaction, if any, would only be temporary in nature and the markets will bounce back.
“Whatever impact we see in the market would be temporary and very short term in nature. Foreign investors were anyways not major buyers in the recent past so even if there is an impact on their flows, it will not have a significant impact,” said Balasubramanian.
Incidentally, the benchmark Sensex and Nifty opened slightly in the green today with the Sensex up 115 points at 9:45am and the Nifty gaining 26 points.
From a sector perspective, Balasubramanian believes that investors should look at sectors and stocks that are more linked to the domestic growth story.
“In terms of sectors, those linked to domestic growth story should continue to do well,” he said.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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