ride the market rollercoaster: geopolitical conflicts and stock market swings - what you need to know
Economic Insights from Historical Indian Conflicts for Investors during 'Operation Sindoor': Lessons Learned from Previous Wars and Their Impact on Financial Markets
Get a grip on the market's ups and downs during India's military conflicts. Learn how to stay calm and reap long-term gains. Here's the lowdown on past examples.
going through turbulence
India's stock market may feel a bit jittery following military conflicts, but at times like these, keep your cool. In a report by Kotak Mutual Fund, they emphasize that although conflicts temporarily trigger fluctuations, there's no real derailment for the country's long-term financial story. Don't let fear make you hit the panic sell button!
the latest drama: balakot 2019
Need a quick history refresher? Back in 2019, the Balakot airstrike between India and Pakistan unfolded from February 14-26. Fret not; the Nifty returned a solid 8.9% a year later, despite taking a small dip in the short term.
history repeats itself: operaton sindoor & the uri strikes
The Uri surgical strike in 2016 is another example that history seems to enjoy repeating. You might recall the Nifty sinking just 0.3% and 0.4% on the days of the attack and strike, respectively. Afterward, the index went on to deliver impressive returns of 11.3% in a year.
the showdown at kargil – a modern war tale
Traveling back to 1999, the Kargil War between India and Pakistan stands out as one of the last significant conflicts. Spoiler alert: the stock market didn't crumble despite an initial skid. After some initial panic, the market rebounded, ending the war with a 29.4% gain in a year.
a glimpse at the past conflicts’ impact on macro-economic numbers:
- the Kargil War (1999-00): inflation jumped up to 5.90%, but bounced back to 3.30% the next year. The economy flourished, with the GDP growing from 6.18% to a whopping 8.85%.
- the Bangladesh Liberation War (1971-72): the GDP dipped from 3.30% to 1.19%, while inflation climbed over 5.5%.
- the Indo-Pakistan War (1965): the GDP spiked to 7.45% when the war occurred, dipping only slightly the following year. Inflation, however, soared to 10%.
- the Sino-Indian War (1962): the FY1962 GDP stood at a decent 3.72%, but the inflation rate skyrocketed to 3.63% in the following year.
what's in the stars now?
Kotak Mutual Fund outlines plausible scenarios for the present conflict. A prolonged struggle could potentially lead to higher inflation and deficit rates, causing further market corrections. However, a quicker resolution may result in the market stabilizing, with limited long-term impact on economic parameters.
Their prediction? Don't abort your SIPs or start panic-selling. Instead, consider phased investments and adding more funds if possible.
Stick with us for continuous updates on the stock market and expert insights. Don't let uncertainty get the best of you; ride the eventful market rollercoaster with confidence!
- Despite temporary fluctuations caused by military conflicts, India's long-term financial story remains largely untouched, as observed in Kotak Mutual Fund reports.
- The Balakot airstrike in 2019 between India and Pakistan, which lasted from February 14-26, did not halt the market's recovery, with the Nifty recording a solid 8.9% return a year later.
- The Uri surgical strike in 2016 is another instance where the market remained resilient, with the Nifty sinking minimally on the days of the attack and strike, and delivering impressive returns of 11.3% in a year.
- The Kargil War in 1999 showed the market's ability to rebound after an initial skid, ending the conflict with a 29.4% gain in a year.
- Historical data shows that wars and conflicts have had varied impacts on India's macro-economic numbers. For instance, during the Bangladesh Liberation War in 1971-72, the GDP dipped while inflation climbed, but bounced back the following year.
- Investors should consider Kotak Mutual Fund's projections for the current conflict, where a prolonged struggle could lead to higher inflation and deficit rates, causing market corrections. On the other hand, a quicker resolution could result in the market stabilizing with limited long-term impact.
- Amid the uncertainty brought by geopolitical conflicts and stock market swings, investors are encouraged to remain calm and focus on long-term investment strategies, such as scheduled investment plans (SIPs) and phased investments, rather than panicking and selling in haste.
