India strikes Pakistan: Avoid panic, opt for staggered approach over lump-sum investment

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Avoid panic

As tension escalates, how should investors position themselves?

While geopolitical tensions — such as the present India-Pakistan conflict — can cause short-term market turbulence, Money Mantra founder Viral Bhatt said history shows that Indian markets are resilient.

During the 1999 Kargil War and the Balakot airstrikes in 2019, markets dipped initially but rebounded within weeks. Such events rarely derail the long-term growth trajectory of the economy.

“Investors should avoid emotional reactions and instead use this as a moment to reassess asset allocation, maintain diversification, and stay committed to their long-term financial goals. Discipline, not panic, is what delivers results through uncertainty,” Bhatt said.

Also read | Gold futures down 0.46% at Rs 97,047 after India strikes Pakistan

The government action suggests a low possibility of a war, a Kotak Mutual Fund note said. "However, in case of a full-blown war, we must note that since 1950, India has seen four major wars. In the last major conflict (Kargil-1999), the equity markets have remained robust after an initial panic," the fund house said.

Impact on the economy

According to Vivek Banka, founder, GoalTeller, an escalation, unless a full-blown war, should be one of the least worries for investors, as the impact is very short-lived.

“One of the big past worries of such strikes was of a sanction which is practically irrelevant now due to the support of western economies. Furthermore, India stands very strong economically and also politically and the oil price decline is a strong cushion," Banka said.

According to the expert, past wars and even such strikes have seen markets scale back past tops within a quarter, hence declines should be used as an opportunity to deploy.

“The bigger worry would be the decline in consumption demand and whether the income tax cuts help spur that,” he said.

Also read | Arbitrage funds are the favoured option as market sentiment remains strong

Access goals, stick with SIPs

It is difficult to predict the market direction, however, the last major conflict triggered temporary drawdowns before markets rebounded, Kotak Mutual Fund said.

"Staying invested and avoiding knee-jerk decisions may be prudent for long-term wealth creation," it said.

Harshad Chetanwala, co-founder, MyWealthGrowth, said, "From an economic perspective, India is not expected to face major challenges. However, these are cautious times but investors need not panic."

For investors whose goals are six months to one year away or need money in the near future, Chetanwala suggested taking out money gradually.

Irrespective of how the equity markets are performing or geopolitical uncertainties when your investment goal is near, it's wise to de-risk and preserve capital rather than chase returns.

In the event of an escalation, investors should respond with a clear understanding of their time horizon, risk tolerance and goals.

Also read | Is investing in corporate bonds worth the risk?

If you're already invested and have a long-term goal, hold on and don’t deploy more unless you're confident in your time frame and risk appetite.

If you're planning a new lump sum, consider staggering it through systematic transfer plans (STPs) over several months to reduce timing risk.