How has Sensex performed in previous India-Pakistan clashes?

Geopolitical tensions between India and Pakistan have intensified in the last couple of days, jolting investor sentiment. That said, your portfolio should be the last thing to worry about now.

To put your anxiety to rest, we revisited the major instances when our armed forces were called upon to confront Pakistan and examined how the stock market reacted, not just in the short term but over longer investment horizons.

Here's what we found:

Markets don't panic for long

Data across multiple events is clear: geopolitical tensions may jolt the market briefly, but they rarely derail its long-term trajectory. Whether it was the Kargil War, the 2008 Mumbai attacks or the Balakot airstrikes, Indian equity markets absorbed the shock and moved on - often faster than expected.

Even in 1999, amid a prolonged and high-stakes conflict in Kargil, the Sensex delivered a 36.9 per cent return during the war period. Similarly, after the tragic events of 26/11, the market bounced back sharply, with a one-year return of nearly 87 per cent. That said, these returns were also influenced by several other economic and global factors at play during these periods.

On the other hand, short-term reactions - like the -1.6 per cent dip after the Uri surgical strikes or the muted response to the Pulwama-Balakot episode - reversed swiftly as investors refocused on fundamentals.

What should you should do

Emotions run high during geopolitical crises. But successful investing is less about reacting to the news and more about staying anchored to your plan. Here are the principles to keep in mind:

Focus on controllables: You cannot control whether tensions escalate or resolve, nor predict global responses. But your investment goals, time horizon and portfolio construction are within your control. If those are aligned, stay the course.

Revisit your asset allocation: Ensure your equity-debt mix matches your risk tolerance and investment horizon. If current volatility is making you nervous, it might be a sign to review-not overhaul-your allocation.

Continue investing systematically: Systematic investments average your cost over time. During market dips, you buy more units. These lower-cost purchases strengthen long-term returns when markets recover.

Avoid a short-term mindset: If your goal is near-term (within 2-3 years), equity is not the right vehicle. But if your goal is long-term, geopolitical events - even wars - are mere blips on your investment timeline.

Do not sell in panic: Resist the urge to exit during volatility. Selling during a dip turns notional losses into real ones. If your fund or stock's fundamentals haven't changed, there's no reason to exit.

Also watch: Market Turbulence: Should You Stay Invested or Make a Move?

This article was originally published on May 09, 2025.