The Nifty 50 has fallen 5.21% between 27 February and 11 March. Foreign institutional investors are selling. Brent crude has climbed 26%—from $72.48 to $91.42 a barrel as of 6:30pm IST on 11 March. The rupee has weakened.
For retail investors who entered the market during the strong rally of recent years, portfolio returns are suddenly starting to look volatile.
But what should investors actually do when geopolitical conflicts such as the one unfolding in West Asia begin to ripple through financial markets?
Oil risk
For Indian markets, crude oil is one of the most critical macro variables.
India imports nearly 90% of its crude oil requirement, making it one of the most exposed large economies to global oil price swings. Since the conflict escalated, crude prices have turned sharply volatile.
The real concern for India is not just Iran’s oil output of roughly 3–4 million barrels per day, but the threat to the Strait of Hormuz—the narrow waterway through which nearly a fifth of the world’s oil supply passes every day. Any disruption there would affect every major oil importer, including India.
That risk has already played out in prices. Brent crude surged from about $72.48 a barrel on 27 February to an intraday peak of $119.40 on 9 March—a jump of nearly 65% in less than two weeks—before retreating partially to around $86–87. Even after the pullback, prices stood at $91.42 on 11 March (as of 6.30pm IST), still 26% higher than where they were when the conflict began.
Macro pressure
According to Nilesh Shah, managing director and chief executive officer of Kotak Mutual Fund:
“Higher oil price is the Rahu Kal of Indian Kundali. Every 10% jump in oil prices adversely impacts our CPI inflation by 20 bps in primary effect, 10 bps in GDP growth and 10 bps in current account deficit on a back of envelope calculation. If we take both primary and secondary effects the hit will almost double. This puts pressure across rupee, rates and equity markets.“
“Equity market doesn’t like uncertainty. While India is safe from the direct impact of war (no missiles falling in our backyard), Indians are getting impacted. Nine million Indians work in the Gulf. They send billions in remittances. Markets will be watching the events to calculate the adverse impact of geopolitical developments,” Shah added.
However, some experts believe the oil spike may not sustain.
“Crude went above $120 in 2022 and then came down to $66. There is ample supply of oil in the world—the primary issue right now is dislocation,” said Deepak Shenoy, chief executive officer of Capitalmind Mutual Fund. “Futures markets are already showing backwardation, with July-August delivery crude available cheaper than current prices.”
History lesson
Despite the , economists remain broadly optimistic about India’s economic resilience.
Long-term investors should not panic, said Madan Sabnavis, chief economist at Bank of Baroda.
“India’s economic fundamentals have not changed because of what is happening in West Asia. For someone with a long-term horizon, this is actually a reasonable time to be buying. FPI selling is more to do with rebalancing global portfolios. It is not a verdict on India,” he added.
Historical data also shows that oil shocks do not necessarily derail economic growth.
“Over the past two decades, there have been several episodes of sharp oil price increases. India’s GDP growth averaged around 6.2% in the year preceding oil spikes, improved to about 7.2% during the period of rising prices, and moderated slightly to 6.7% in the following year,” said Shweta Rajani, head – mutual funds, Anand Rathi Wealth, a wealth management firm.
“While higher oil prices create short-term inflationary pressures, the broader economic growth trajectory has historically remained resilient,” she added.
Global data shows markets typically recover from . When Germany invaded Poland in September 1939, the S&P 500 fell 33.9% and took 890 trading days to recover, yet by the end of World War II in September 1945 it had delivered a 37% return—about 5.4% annually—from the war’s start.
The Yom Kippur War of 1973 caused a steeper 43.5% fall and a 1,504-day recovery (see: gfx). More recent conflicts have seen quicker rebounds: markets fell 16.6% after Russia invaded Ukraine in February 2022 and recovered in 323 trading days, while the Israel-Gaza war in October 2023 saw only a 5% drop, with markets recovering in 19 trading days and delivering a 31.4% return over the following year.
Stay invested
Experts therefore advise investors to avoid panic selling and remain disciplined.
“It does not make sense to get out of equities now. You sit out for one to two years, nothing happens, and then suddenly strong returns may come. Past data also shows that returns come to those who stay,” Shenoy said.
Research from FundsIndia supports this view. Indian equities have doubled in about six to seven years around 74% of the time and tripled in about 10–11 years around 81% of the time, highlighting the compounding potential of the market.
Another FundsIndia analysis shows that markets witness temporary declines of 10-20% almost every year, yet close the year with positive returns about 80% of the time.
Exiting markets during volatility also risks missing the strongest recovery days.
An analysis by PGIM India Mutual Fund covering 4 September 2001 to 31 December 2025 showed that investors who remained fully invested in the Nifty 500 TRI earned 17.3% annualised returns. Missing just the 10 best days would have reduced returns to 13.7%. Missing the 30 best days would have cut returns to 8.8%, while missing the 50 best days would have reduced returns to just 4.7%.
“If you have cash sitting on the sidelines, this is a reasonable time to start deploying it gradually—not all at once, but in a measured and systematic way. If you are already fully invested with no spare cash, the answer is simpler: do nothing. Do not sell a quality equity portfolio during a correction unless for any contingency,” said Kavitha Menon, founder of Probitus Wealth, a ‘fee-only’ wealth advisory firm.
“Every serious correction feels like the end. It never is. The real risk right now is not the falling prices. It is the decisions investors make in response to falling prices. SIP investors should do nothing. Lump-sum investors with a five-year horizon should see this as an opportunity. The people who will regret this phase are those who stopped investing, not those who continued,” said Dhirendra Kumar, founder of Value Research, an investment advisory firm.
Portfolio reset
That said, some investors may need to rebalance portfolios.
“If your portfolio has been heavily skewed towards small- and mid-cap funds, or momentum-driven strategies purely to chase returns—that is where the real pain is right now,” Menon said.
“This correction is a signal to reassess. Not to panic-sell everything, but to gradually reduce the high-risk, high-reward positions that were never really part of a structured allocation strategy.”
Since the conflict began, mid-cap funds have fallen 3.37% on average, while small-cap funds are down 3.27% as of 10 March 2026. Mutual fund returns come with a day’s lag.
Rebalancing also means strengthening underweight asset classes.
If gold allocation is below 10%, this may be a reasonable time to increase it. Similarly, a correction is a reminder of why debt allocation matters.
“Strong asset allocation is the first line of protection in black swan events. Ordinary investors who always had allocation to debt and debt-like products alongside their equity are seeing that stability play out right now,” Menon said.
Simpler route
For investors who find managing multiple asset classes difficult, multi-asset allocation funds may offer a simpler solution.
“Multi-asset funds are a good option for investors who want asset allocation within a single fund in a more tax-efficient way,” said Vishal Dhawan, founder of Plan Ahead Wealth Advisors.
“Regular rebalancing across separate funds can trigger capital gains taxes each time. A multi-asset fund does that rebalancing internally, without creating a tax event for the investor,” he added.
After the recent correction, the Nifty’s price-to-earnings ratio has moderated to around 20 times—a level Rahul Singh, chief investment officer—equities at Tata Mutual Fund, considers reasonable.
“There are parts of the Nifty 50 (India’s frontline index along with Sensex) that may be insulated from geopolitics, such as consumer and pharma, or could potentially benefit from a weaker rupee, such as metals, energy, and refining,” he said. “Despite the drag from IT services, Nifty 50 profits in FY27 are estimated to grow at 15-17%.”
For most , the required action may be less dramatic than current market anxiety suggests. Stay invested in quality portfolios. Deploy cash gradually if available. Build a balanced allocation across equity, debt and gold. And if the correction has exposed a portfolio built mainly to chase returns, start fixing it gradually.