New Delhi: Even though the threat of a full-blown war between nuclear-armed India and Pakistan refuse to die down, investors aren’t worried about the safety of their investment. They don’t need to. And they have a good reason not to.
“Investors may take a momentary pause, but this doesn’t derail India’s trajectory as a key allocation in emerging markets,” explains Mohit Mirpuri, an equity fund manager at SGMC Capital. India’s strong growth prospects, economic and political stability don’t make investors jittery.
Early trading on May 7, just hours after the announcement, saw high volatility in the Sensex and Nifty indices, but both ultimately closed without much fluctuation.
To top it all, India is amongst the first countries to sign a trade deal with the Trump administration, offering a buffer against the tariff war with China and other countries. Recently, India also signed a trade deal with the UK that can help boost trade by more than 60% annually from 2024 figures.
Historically, wars or war-like events like this haven’t had much of an effect on the stock market, partly because the fighting affects only a small area, and Pakistan has never been a major trading partner for India anyway.
However, gloomy days are ahead on the other side of the Wagah border.
Pakistan’s benchmark KSE-100 index dropped 10% after news of the strike came out. Though investors have seen handsome returns, they still fear volatility due to geopolitical tensions, economic instability, high levels of debt and a dominance of commodity-based stock options.
India, on the other hand, has a fairly diverse stock market, with a mix of commodity- and technology-intensive stocks. Foreign Institution Investors (FIIs) have consistently poured money into the market, and continue to do so due to attractive returns and a relatively stable demand from a growing economy.
Remain calm and cautious: Experts
“Even in the event of a substantial escalation, we believe the Nifty 50 is unlikely to correct more than 5-10%,” said Anand Rathi, Founder of Anand Rathi Group, a leading Financial Investment Company.
“We believe Indian assets will remain fairly contained despite the increase in geopolitical tensions with Pakistan,” Johanna Chua, global head of emerging market economics at Citibank, noted while addressing its clients.
