Steady Markets: How Indian Stocks Weather India-Pakistan Tensions

Anand Rathi Research finds Indian stock markets remain stable amid India-Pakistan tensions, with notable stability since the 2001 attack. On average, markets see minor corrections during geopolitical stress. The study advises investors to maintain a strategic 65:35:20 portfolio allocation amidst current rising tensions.

According to a report by Anand Rathi Research, Indian stock markets have shown resilience during periods of military or political tensions with Pakistan. The study highlights that, apart from the 2001 Parliament attack, Indian equities have generally not fallen more than 2% in response to such high-risk events.

The report emphasizes that the notable market decline during the 2001-02 period was likely more influenced by global occurrences, such as a significant 30% drop in the U.S. S&P 500 index, rather than the conflict with Pakistan alone. On average, during major geopolitical events, Indian markets corrected around 7%, with a median correction of about 3%.

Amid escalating tensions following a recent terrorist attack in Pahalgam, the analysis provides insights into market behavior. Anand Rathi Research examined historical data from past India-Pakistan confrontations and 19 other global conflicts among G20 nations. The study suggests maintaining a 65:35:20 investment strategy by emphasizing equities, debt, and alternatives respectively, advising those with equity gaps to align their portfolios now.