Even as geopolitical tensions continued to weigh on market sentiment, market experts suggest that history offers a reassuring message for investors: while conflicts trigger short-term volatility, long-term equity returns have remained resilient—and often rewarding.
According to a recent market outlook by PL Capital, the resurgence of geopolitical risks, particularly in West Asia, has led to heightened volatility driven by rising crude oil prices, inflation concerns and currency pressures. Equity benchmarks have corrected by 7-8 per cent since the war began and were down close to 5 per cent last week, according to a Bonanza analyst.
“Markets may remain sensitive to global developments in the near term,” the PL Capital report noted, adding that fluctuations in commodities and foreign flows could keep equities range-bound in the coming months.
However, the brokerage emphasised that India’s structural growth drivers—such as strong domestic consumption, infrastructure spending, and improving corporate balance sheets—remain intact. This underlying strength, it argues, provides a solid foundation for long-term equity performance despite external shocks.
Although the current market weakness appears broad-based due to risk repricing from the conflict, market volatility has not fundamentally altered long-term growth outlooks or earnings trajectories of companies, Vinit Bolinjkar – Head of Research- Ventura, emphasised.
Market recoveries after wars
Looking at past wartime corrections, Balaji Rao Mudili, Research Analyst at Bonanza, noted that the BSE Sensex has typically fallen around 10 per cent during conflict periods, but recoveries have taken an average of just 38 days.
Tata AIA Life Insurance reinforces this perspective through historical analysis. Examining past global and domestic conflicts—from the Gulf War (1990) and the Iraq War (2003) to more recent events like the Russia–Ukraine conflict (2022), the report finds that markets typically experience an initial dip followed by a steady recovery. In many cases, returns over a one- to five-year horizon were significantly positive.
During episodes of domestic uncertainty, such as the Kargil War in 1999, the Mumbai 26/11 attacks, the Uri and Pulwama attacks, markets have historically rebounded strongly after the initial decline, delivering gains of as much as 35 per cent within a year and more than doubling over the following two to three years. That said, recoveries have not always been swift, and in several instances, investors needed to remain patient for longer periods before markets regained momentum.
| Conflict | Date | 1Y after | 2Y after | 3Y after |
|---|---|---|---|---|
| Kargil War | May 1999 | +36% | 16% | +82% |
| Mumbai 26/11 | Nov 2008 | +82% | +109% | +120% |
| Uri Attack | Sep 2016 | +15% | +28% | +100% |
| Pulwama Attack | Feb 2019 | +13% | +41% | +103% |
| Operation Sindoor | May 2025 | NA | NA | NA |
Source: Tata AIA report (Data from NSE. Past performance is not indicative of future returns. Returns represent Nifty 50 Index performance relative to the event date.)
A similar pattern has been observed during geopolitical conflicts, which have triggered volatility in oil prices. For instance, during the Gulf War in 1990, Indian equities delivered returns of around 50 per cent one year after the event and nearly 200 per cent over five years. Similarly, post the Iraq War (March 2003), markets rose approximately 68 per cent within a year and over 300 per cent across five years.
| Conflict | Date | 1Y after | 2Y after | 5Y after |
|---|---|---|---|---|
| Gulf War | Aug 1990 | +50% | +128% | +199% |
| Iraq War | Mar 2003 | +68% | +106% | +346% |
| Libya Civil War | Feb 2011 | +1% | +7% | +31% |
| Russia-Ukraine | Feb 2022 | +7% | +37% | NA |
Source: Tata AIA report (Data from NSE, Bloomberg. Past performance is not indicative of future returns.)
“While short-term volatility may create uncertainty, it rarely defines the long-term market trajectory,” the Tata AIA noted. “In fact, some of the most rewarding investment opportunities arise during these periods of stress.”
Balaji Rao Mudili, Research Analyst at Bonanza, said that history shows time spent in the market matters far more than predicting short-term movements.
Over the past 30 years, the Nifty 50 has delivered average annual returns of about 12–14 per cent, translating into a compounded gain of roughly 35–37 times. However, if an investor attempted to time entries and exits and missed the best 30 trading days, returns would fall sharply to just 5–6 times the initial investment, he added.
“Looking at 5-year average period on Nifty 50 (current at 20.5x vs Avg of 22.3x), NiftyMidcap150 (current 31x vs Avg of 34x), NiftySmallcap250 (current at 24.4x vs Avg of 28.4x), or Nifty 500 (current at 21.8x vs Avg of 24.2x), the current multiples have corrected significantly and are now sitting at a healthier valuation setup than what we saw during the 2023–24 peak.”
Investment approach
Periods of crisis often see panic selling, reduced participation, and triggered stop-losses, leading to sharp but temporary declines in asset prices. Yet, disciplined investors who remain invested—or gradually deploy capital during corrections—have historically benefited from subsequent recoveries.
PL Capital advised a balanced approach in the current environment, recommending a focus on high-quality companies with strong earnings visibility. Sectors such as financials and infrastructure are expected to remain key growth drivers, while defensive segments like healthcare and utilities can provide stability during volatile phases. The report also underscores the importance of diversification, including allocations to gold as a hedge against geopolitical risks.
For investors willing to stay patient and disciplined, periods of uncertainty have historically served not as barriers—but as entry points.
Looking across investment horizons, the brokerages suggest that while the near term may remain uncertain, the medium- to long-term outlook for equities remains constructive. “Equities are likely to remain the primary wealth creation asset class,” PL Capital stated, particularly as India’s economic expansion is supported by consumption growth, digital transformation, and ongoing capital expenditure.
In terms of asset allocation, Bonanza’s preference would be equities, followed by mutual funds, then gold, and lastly bonds.
Mutual fund inflows
Despite market volatility, the mutual fund industry has remained resilient. Mudili said February data shows systematic investment plan (SIP) contributions stood at ₹29,845 crore, reflecting a 15 per cent year-on-year rise. On a month-on-month basis, inflows were marginally lower by about 4 per cent, largely due to mark-to-market corrections.
Retail investors continue to prefer equity-oriented schemes and SIPs for long-term savings, he added, noting that early March trends also indicate steady inflows.