The Sensex is on track to close the week down nearly 4,000 points, while the Nifty has shed approximately 5% in just five trading sessions as the Iran war creates havoc across Middle Eastern countries. With Brent crude hovering around $100, bulls have been thrown on the defensive as foreign institutional investors persist with sustained selling that has dragged down even blue-chip largecaps.
The carnage has extended to the currency markets. The Indian rupee plummeted to a lifetime low of 92.4325 per dollar on Friday, eclipsing Thursday’s previous all-time low of 92.3575. The currency has lost 1.5% since the Iran war erupted, strained by mounting worries over how the oil price surge will impact growth-inflation dynamics and capital flows for the South Asian economy.
Analysts warn the outlook could deteriorate further. A prolonged Middle East conflict may push the rupee beyond 95 per dollar, particularly if energy prices remain persistently elevated.
FIIs have withdrawn about Rs 52,000 crore from Indian markets so far this month, amplifying the selling pressure.
Yet amid the bloodbath, market veterans are striking a contrarian tone, arguing that the panic may be creating precisely the buying opportunity long-term investors should embrace.
“If one looks at past geopolitical crises, a very interesting pattern emerges in the way markets react,” said N. ArunaGiri, CEO of TrustLine Holdings. “Almost without exception, in most crises, the bulk of the price damage—particularly in the Indian markets—tends to happen within the first few days of the outbreak of the conflict.”ArunaGiri acknowledged that the current crisis, with its strong linkages to crude oil prices via the Hormuz Channel, could trigger more intense volatility. “However, it is quite likely that the worst of the price damage may already have played out in the initial phase,” he said. “It is time to invest, not to time the bottom.”
He said the approach needs to remain selective, bottom-up, and gradual. In the current environment, disciplined stock pickers are almost spoilt for choice, with no dearth of compelling opportunities emerging across the broader market, the market veteran said.
Axis Mutual Fund echoed that historical perspective. Over the past 15 years, Indian equities have navigated multiple geopolitical events from regional conflicts, border tensions and global wars with only brief and shallow drawdowns, the fund noted. In almost every instance, markets stabilized once it became clear that economic growth, earnings and policy frameworks remained intact.
“Periods of uncertainty are best met with discipline, diversification and patience,” Axis said. “Staying invested through volatility has consistently proven more rewarding than reacting to fear, as fundamentals tend to reassert themselves over time.”
From a valuation perspective, the recent correction has made markets more attractive, according to Axis. Valuations have become more compelling, earnings expectations have improved, economic momentum is picking up, and domestic inflows remain supportive.
WhiteOak Capital Mutual Fund advised investors to resist the temptation to abandon their strategic asset allocation. “When a crisis hits and markets fall, your equity allocation automatically drops as a percentage of your portfolio,” the fund said, recommending that investors rebalance if they’ve drifted outside their pre-defined bands.
“Investors who, based on emotions, sell during geopolitical shocks underperform than those who stay patient and disciplined,” WhiteOak warned. “Not because they’re bad at picking investments, but because they exit at the wrong moment, stay on the sidelines, and then re-enter near the top, or never re-enter at all.”
One segment defying the broader selloff is pharmaceuticals. “This sector is not impacted by external headwinds. In fact, rupee depreciation is a positive for the sector, which is a major exporter,” said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited. “It appears that portfolio churns are happening in favour of pharmaceuticals.”
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His advice for investors navigating the turbulence? “There is nothing much investors can do in these challenging times other than remaining calm and continuing with systematic investment.”
The question now is whether the initial shock has run its course or if deeper pain lies ahead as the Middle East conflict grinds on and oil prices threaten India’s fragile economic balance.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)