India–Pakistan hostilities generally remain simmering as background chatter; and yet, whenever these hostilities escalate, they have very swift and sour effects on the markets. Early May 2025 saw Dalal Street shaken following yet another bout of cross-border conflict.
The Nifty 50, under pressure, corrected by 1.1% on May 9, while the BSE Sensex also fell by roughly 880 points, nearly 1.1%,to close around 79,454. This sudden dip wiped out gains recorded over multiple sessions, creating a flashback for investors: any geopolitical disturbance is like a kick in the groin for the equity market. Yet even then, the Indian market is strong enough to stanch damage from such geopolitical tensions. The year 1999 witnessed the Kargil War, during which the Sensex fell briefly, only to rebound and rally over 35% in the succeeding months.
The effects of the 2001 Parliament attacks, the Uri strikes of 2016, and the airstrikes at Balakot in 2019 were all short-lived. Price volatility may rise, yet investor confidence in India’s macro fundamentals has historically helped prices recover once clarity returns. From a portfolio theory perspective, short-term corrections during geopolitical shocks reflect sentiment-driven selling rather than true structural weakness. The retail investor may feel pressured to exit positions, but history has shown that emotional reactions often lead to missed opportunities. A more effective tactical asset allocation strategy could be to increase exposure to defensives such as FMCG, utilities, and healthcare to mitigate downside risk during turbulent times.
