Worst fallout of wars often priced in early, dollar weakness need not mean weakness in global stock markets: Sushil Kedia

Worst fallout of wars often priced in early, dollar weakness need not mean weakness in global stock markets: Sushil Kedia

Even as there is anticipation of retaliatory action by India to the terror attacks in Kashmir last week, investors should “act now, than panic later”, as history shows that the worst fallout of wars is typically priced into markets on the first day of conflict, strategist Sushil Kedia said.

Drawing on historical patterns, Kedia, founder of Kedianomics, said that price damage in equity markets often precedes the formal outbreak of hostilities, and that experienced investors act on price action, not causation. "By the time the first bullet is fired, most of the price correction tends to be behind us," he said, citing the Kargil war and broader historical studies of war-market dynamics. “Even during the Kargil war, the price action happened on the first and second day, and then the market formed a bottom,” Kedia pointed out.

According to Kedia, the steep rise in the Nifty led by banks is a “bull trap” and technical formations suggest that banks are set for a decline, taking Nifty to new lows over the next 10 to 12 weeks.

With tensions escalating between India and Pakistan, Kedia advised market participants to focus on price patterns rather than waiting for confirmation on narrative-driven fears. "Causation is an illness of the intellect. Markets anticipate and move ahead of events," he said.

On the global front, Kedia pointed to significant weakness in the dollar index, need not be suggestive of across-the-board weakness in global stock markets. He emphasised that the relationship between the dollar and equity markets is nuanced: when U.S. economic strength is the driving theme, the dollar and stock markets are positively correlated. However, when it not the driving theme, there is a negative correlation.

Watch the full conversation here: Sushil Kedia, Founder, Kedianomics, on What’s Next for Nifty and Bank Nifty

"Money is a human affair, not a quantitative formula," Kedia said. He urged investors to prioritise price patterns and sentiment over mechanical models or rigid expectations. "Follow the prices, follow the patterns, and don’t over-intellectualise."

Kedia recommends proactive positioning now, with a focus on technical analysis and sectoral leadership, rather than waiting for confirmation from geopolitical events.