When geopolitical tensions rise between India and Pakistan, it’s natural for investors to feel a wave of anxiety. After all, war-like headlines don’t just impact national morale — they rattle the markets too. The recent flare-up between the two nations is no different. Media coverage has been intense, emotions are high, and many investors are left wondering: Should I pull out my money? Will the Sensex crash?
But before you rush into any decision, take a moment to zoom out. What does history say about the Indian stock market’s response to these cross-border escalations? Surprisingly, it tells a story of resilience and even growth.
To understand this better, let’s look at how the Sensex has performed during some of the major India-Pakistan confrontations over the past few decades. These include both military actions and terror attacks that led to significant national and global reactions.
Looking Back at Market Behaviour During Conflicts
Consider the Kargil War in 1999. Despite being a high-stakes, prolonged conflict, the Sensex rose by a remarkable 36.9% during that period. One year from the start of the war, it was still up by 28.3%. Fast forward to 2008, after the horrific Mumbai terror attacks that killed over 160 people, the market initially dipped by around 2.1%, but within a year, it had bounced back with an impressive 86.7% return. Even recent events like the Pulwama attack and Balakot airstrikes in 2019 saw the market hold steady, posting a modest gain of 0.5% during the crisis and 15% over the next year.
On the other hand, events like Operation Parakram (post-Parliament attack in 2001) did trigger a larger dip of -12.7% in the short term. But again, if you had simply held on, the Sensex would’ve rewarded your patience with a 31.2% gain over the next five years. Short-term jolts? Yes. Long-term derailments? Rarely.
This pattern reveals a deeper truth: Indian equity markets are remarkably adept at absorbing geopolitical shocks. Often, the market’s reaction is sharp but short-lived. Investors quickly pivot back to fundamentals, and the larger economic momentum tends to resume.
Why Markets Don’t Stay Spooked for Long
What explains this resilience? It’s partly psychological and partly structural. While geopolitical crises dominate headlines, equity markets are forward-looking. They price in not just fear, but also fundamentals like earnings, growth outlook, and liquidity.
The Indian stock market has historically demonstrated a strong ability to “look through” temporary uncertainty. The events may be tragic and disruptive, but markets often distinguish between political noise and long-term economic potential. This is especially true in a country like India, where domestic consumption, infrastructure development, and corporate earnings tend to recover quickly.
Even when there was a dip, such as the -1.6% drop following the 2016 surgical strikes, the market quickly recovered. The muted response during the Pulwama-Balakot standoff in 2019 further underlined how seasoned investors have learnt not to panic with every geopolitical tremor.
So, What Should You Do as an Investor?
When the threat of war intensifies, the urge to take action can be overwhelming. However, successful investing is less about reacting to headlines and more about following a plan. Here are four timeless principles to keep in mind:
First, focus on what you can control. You cannot predict when tensions will escalate or cool down. You cannot forecast oil prices, global sanctions, or international diplomacy. But you can control your asset allocation, your time horizon, and your ability to stay calm. If your goals and risk appetite are aligned, there’s no reason to change course.
Second, revisit your portfolio, but don’t overhaul it. If the volatility is making you nervous, check whether your equity-debt mix suits your current risk tolerance. Sometimes, a small rebalance can restore your peace of mind. But resist the urge to exit completely. Selling in panic almost always does more harm than good.
Third, keep investing systematically. SIPS are designed to thrive in volatile markets. When prices fall, your SIP buys more units, bringing down your average cost and positioning you for higher returns when markets rebound. Don’t pause your SIP during a dip. That’s like walking out of the gym the moment the workout gets tough.
Lastly, avoid a short-term mindset. If your goal is less than 2–3 years away, equity might not be the right vehicle anyway. However, for long-term objectives such as retirement, financial freedom, or wealth creation, geopolitical events, including wars, serve as mere obstacles on a significantly longer path.
Final Thoughts
Across all major India-Pakistan confrontations, the pattern is clear: markets may wobble, but they don’t collapse. They recover, grow, and reward patience.
Yes, the fear is real. But so is the data. And the data says: don’t sell in panic. If the companies you’ve invested in are fundamentally strong, and your financial plan is sound, then war headlines shouldn’t dictate your next investment move.
So take a deep breath. Stay focused. And let time, not fear, shape your returns.
(The author is Cofounder & Executive Director, Prime Wealth Finserv)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
But before you rush into any decision, take a moment to zoom out. What does history say about the Indian stock market’s response to these cross-border escalations? Surprisingly, it tells a story of resilience and even growth.
To understand this better, let’s look at how the Sensex has performed during some of the major India-Pakistan confrontations over the past few decades. These include both military actions and terror attacks that led to significant national and global reactions.
Looking Back at Market Behaviour During Conflicts
Consider the Kargil War in 1999. Despite being a high-stakes, prolonged conflict, the Sensex rose by a remarkable 36.9% during that period. One year from the start of the war, it was still up by 28.3%. Fast forward to 2008, after the horrific Mumbai terror attacks that killed over 160 people, the market initially dipped by around 2.1%, but within a year, it had bounced back with an impressive 86.7% return. Even recent events like the Pulwama attack and Balakot airstrikes in 2019 saw the market hold steady, posting a modest gain of 0.5% during the crisis and 15% over the next year.
On the other hand, events like Operation Parakram (post-Parliament attack in 2001) did trigger a larger dip of -12.7% in the short term. But again, if you had simply held on, the Sensex would’ve rewarded your patience with a 31.2% gain over the next five years. Short-term jolts? Yes. Long-term derailments? Rarely.
This pattern reveals a deeper truth: Indian equity markets are remarkably adept at absorbing geopolitical shocks. Often, the market’s reaction is sharp but short-lived. Investors quickly pivot back to fundamentals, and the larger economic momentum tends to resume.
Why Markets Don’t Stay Spooked for Long
What explains this resilience? It’s partly psychological and partly structural. While geopolitical crises dominate headlines, equity markets are forward-looking. They price in not just fear, but also fundamentals like earnings, growth outlook, and liquidity.
The Indian stock market has historically demonstrated a strong ability to “look through” temporary uncertainty. The events may be tragic and disruptive, but markets often distinguish between political noise and long-term economic potential. This is especially true in a country like India, where domestic consumption, infrastructure development, and corporate earnings tend to recover quickly.
Even when there was a dip, such as the -1.6% drop following the 2016 surgical strikes, the market quickly recovered. The muted response during the Pulwama-Balakot standoff in 2019 further underlined how seasoned investors have learnt not to panic with every geopolitical tremor.
So, What Should You Do as an Investor?
When the threat of war intensifies, the urge to take action can be overwhelming. However, successful investing is less about reacting to headlines and more about following a plan. Here are four timeless principles to keep in mind:
First, focus on what you can control. You cannot predict when tensions will escalate or cool down. You cannot forecast oil prices, global sanctions, or international diplomacy. But you can control your asset allocation, your time horizon, and your ability to stay calm. If your goals and risk appetite are aligned, there’s no reason to change course.
Second, revisit your portfolio, but don’t overhaul it. If the volatility is making you nervous, check whether your equity-debt mix suits your current risk tolerance. Sometimes, a small rebalance can restore your peace of mind. But resist the urge to exit completely. Selling in panic almost always does more harm than good.
Third, keep investing systematically. SIPS are designed to thrive in volatile markets. When prices fall, your SIP buys more units, bringing down your average cost and positioning you for higher returns when markets rebound. Don’t pause your SIP during a dip. That’s like walking out of the gym the moment the workout gets tough.
Lastly, avoid a short-term mindset. If your goal is less than 2–3 years away, equity might not be the right vehicle anyway. However, for long-term objectives such as retirement, financial freedom, or wealth creation, geopolitical events, including wars, serve as mere obstacles on a significantly longer path.
Final Thoughts
Across all major India-Pakistan confrontations, the pattern is clear: markets may wobble, but they don’t collapse. They recover, grow, and reward patience.
Yes, the fear is real. But so is the data. And the data says: don’t sell in panic. If the companies you’ve invested in are fundamentally strong, and your financial plan is sound, then war headlines shouldn’t dictate your next investment move.
So take a deep breath. Stay focused. And let time, not fear, shape your returns.
(The author is Cofounder & Executive Director, Prime Wealth Finserv)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
