India-Pakistan Tensions and Your Portfolio

The Indian stock markets are currently grappling with fresh challenges as tensions with Pakistan escalate following the tragic terrorist incident in Pahalgam. After a promising start to the year—supported by easing global trade tensions, a stabilizing rupee, and strong FII inflows—the markets have once again turned volatile. Recent geopolitical developments have shaken investor sentiment, causing the Nifty 50 to fall below the 24,000 mark and the Sensex to plunge by over 850 points in intraday trade on Friday.

Investor nerves were further rattled by Pakistan’s response to India’s strong stance, including the suspension of the Indus Water Treaty. Reports of cross-border firing have amplified fears of a potential military confrontation. Consequently, many investors have chosen to trim their equity exposures, avoiding aggressive long positions ahead of the weekend to protect against uncertainty.

However, it is important to step back and consider historical patterns before reacting emotionally. Past incidents of India-Pakistan conflict have shown that while markets may wobble initially, they tend to stabilize quickly.

Source: BL, Fisdom Research

The one exception—the 2001 Parliament attack—saw a sharper market fall, but this was more due to the global tech meltdown and a significant correction in the U.S. S&P 500, rather than the geopolitical situation alone

Even when we look globally, the data tells a similar story. Major conflicts like the Russia-Ukraine war, U.S. military interventions, or Middle East tensions have typically resulted in equity market corrections averaging around 7%, with median declines of about 3.2%. In other words, while initial reactions to conflict can be sharp, markets generally regain their footing once the immediate panic subsides.

For investors, the key question is not “What is happening right now?” but “How should I position myself for the next 5–10 years?” In periods like these, a calm and strategic approach to investing becomes crucial.

New investors, who may be unnerved by seeing their SIP investments temporarily in the red, should stay the course. Historical returns show that investors who continued their SIPs during volatile periods were richly rewarded once the market cycle turned. It is also wise for newer investors to assess the quality of their mutual fund holdings and ensure that emergency funds are parked safely to avoid the need for forced withdrawals during market corrections.

For more experienced investors, this environment offers opportunities. Systematically reallocating some surplus from debt instruments into equity SIPs can allow for accumulation at lower prices. However, instead of trying to perfectly time the market, gradual and disciplined investing works best. Sector rotation can also play a role—given the current uncertainty, defensive sectors such as healthcare, FMCG, and domestic consumption-oriented companies could offer more stability compared to globally exposed sectors like IT or textiles.

Seasoned investors—those who have already seen several market cycles—should think even longer-term. Despite the noise, the fundamental drivers of equity markets remain intact. Yes, the world is undergoing major changes—shifts in global power, technology disruptions, and climate transitions—but equities have historically adapted and thrived through such transformations. Now is the time to selectively strengthen portfolios, build exposure to emerging themes, and maintain a focus on high-quality assets.

In conclusion, while the India-Pakistan tensions have understandably created near-term anxiety, history suggests that these events, while serious, rarely derail the long-term trajectory of equity markets. Successful investing during such periods hinges not on reacting to daily headlines but on maintaining discipline, focusing on asset allocation, and aligning investments with long-term financial goals.

Market this week

Source: BSE and NSE

• Indian equity indices ended higher for the second consecutive week, despite volatility driven by mixed Q4 earnings and rising geopolitical tensions post the Pahalgam terror attack.
• Persistent FII buying and optimism around US-India trade talks supported market sentiment.
• Sector-wise, the Nifty IT index surged 6.5%, Auto gained 3%, while Realty and Pharma rose 1.6% each.
• In contrast, the Nifty Media index fell 2%, and Consumer Durables declined nearly 1%.
• FIIs remained strong buyers, investing ₹17,796.39 crore in equities during the week, while DIIs also net bought equities worth ₹1,131.81 crore.

Weekly Leaderboard

Source: BSE

Stocks that made the news this week:

Maruti Suzuki, India’s largest carmaker, struck a cautious note on the outlook for FY26, citing weak domestic demand and affordability challenges in the passenger vehicle market. The company noted that local market growth was extremely limited and expressed doubts about a significant recovery, even with a potential income tax break. Maruti expects exports to grow to 20% of sales in FY26, up from 18% last year, and emphasized its insulation from U.S. market uncertainties.

Shares of ACC tumbled nearly 6% after the Adani Group cement firm reported a 20% decline in consolidated net profit to ₹751 crore for Q4 FY25, despite a 13% rise in revenue. The company also declared a ₹7.5 per share dividend and set June 13 as the record date. Post-results, Axis Capital downgraded ACC’s rating to ‘Reduce’, although the brokerage still sees a 6% upside from current levels.

Cyient shares also slipped nearly 6% after the company posted a 10% year-on-year fall in net profit to ₹170 crore for Q4 FY25, with only a modest revenue growth of 2.6%. The company announced a ₹14 per share final dividend but refrained from providing FY26 guidance due to persistent macroeconomic challenges, adding to investor nervousness. Nevertheless, Choice Broking maintained a ‘Buy’ rating on the stock, projecting a potential 33% upside.