Atul Shinghal, Founder and CEO, Scripbox, said, “For individuals managing their personal finances, this volatility can feel daunting. However, history shows that markets often recover swiftly after such shocks, and India’s economic resilience provides a strong foundation. By adopting a disciplined approach, you can navigate this uncertainty and keep your financial goals on track. Here’s how to plan your personal finances amid the India-Pakistan conflict, guided by the CALM framework: Continue Investing, Avoid Panic Selling, Look at the Big Picture, Maintain Long-Term Focus.”
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Understanding the context: markets and geopolitical tensions
Geopolitical flare-ups between India and Pakistan are not new, and markets have a well-documented history of reacting to them. Let’s look at past events:
● Kargil War (1999): Before the conflict, the Nifty 50 dropped 13% due to fear. Once the war began and it became clear the conflict was limited to Kargil, markets rallied, with the Nifty surging 41% during the war. Global diplomatic pressure and India’s strong post-liberalisation economy aided the recovery.
Col Sanjeev Govila (retd), Certified Financial Planner, CEO, Hum Fauji Initiatives, a financial advisory firm, said, “Geopolitical tensions, especially between India and Pakistan, often spark market volatility, raising anxiety among investors. Historical data from past conflicts, such as the Kargil war or surgical strikes, clearly indicate that market corrections due to Indo-Pak tensions are usually short-lived, typically correcting around 10-13% initially but rebounding within a few months. Therefore, panic-driven decisions should be avoided.”
● 2008 Mumbai Attacks: Markets dipped briefly but recovered within six months.
● 2016 Surgical Strikes: The Sensex saw a minor correction but bounced back within days.
● 2019 Balakot Airstrike: A small dip was followed by a remarkable 30% market gain over the year.
The pattern is clear: markets initially wobble due to fear but rebound once the situation stabilises, especially when conflicts remain localised and short-lived. This resilience stems from India’s economic strength and the tendency of markets to overreact to worst-case scenarios that often don’t materialise.
Why is this time manageable
The current tensions, while concerning, occur against the backdrop of a robust Indian economy. India remains one of the strongest emerging markets, supported by:
● Robust GDP growth: Projected at 6-7% for 2025, among the highest globally.
● Stable currency: Backed by foreign exchange reserves of approximately $700 billion.
● Resilient corporate earnings: Driven by sectors like IT, financials, and consumer goods.
● Structural reforms: Initiatives like GST, infrastructure spending, and economic formalization have deepened India’s long-term growth potential.
● Proactive policymakers: The Reserve Bank of India (RBI) and the government have a strong track record of swift action, such as liquidity support and fiscal measures, to stabilize markets during crises.
While the US-China tariff war adds global uncertainty, India’s domestic-driven economy provides a buffer compared to export-heavy peers. Global diplomatic efforts are also likely to prevent escalation, as seen in past India-Pakistan conflicts.
“Defensive sectors like healthcare, consumer staples, and utilities tend to withstand uncertainty better, offering relative stability during conflicts,” said Govila.
To weather this storm, Shinghal says one must adopt the CALM approach to manage their personal finances effectively:
C: Continue investing in large-cap-oriented mutual funds
Market volatility often hits mid-cap and small-cap stocks harder, as seen in the recent 2.5% drop in these indices. Large-cap stocks, such as those in the Nifty 50 (e.g., Reliance Industries, HDFC Bank, Infosys), are more stable and better equipped to withstand turbulence.
● Action: Stick to systematic investment plans (SIPs) in large-cap mutual funds. These funds offer diversification and have historically performed well during recovery phases.
● Why it works: Large-cap funds reduce risk while allowing you to benefit from market rebounds.
Selling investments during a market dip locks in losses and prevents you from participating in the recovery. Historical examples, such as the quick rebound after the 2016 surgical strikes, show that patience pays off.
● Action: Review your portfolio’s fundamentals. If your investments are in quality assets aligned with your goals, hold steady. Avoid making decisions based on short-term market noise.
● Why it works: Markets often recover faster than expected once clarity emerges
L: Look at the big picture
India’s long-term growth story remains compelling. Structural reforms, a young workforce, Advanced digital infrastructure and increasing global integration position India as a global economic powerhouse. Geopolitical tensions with Pakistan have historically been contained, and global powers are likely to push for de-escalation.
● Action: Focus on India’s economic strengths—robust growth, healthy reserves, and resilient earnings—rather than temporary geopolitical setbacks. Consider diversifying into defensive sectors like consumer staples or pharmaceuticals, which tend to hold up during uncertainty.
● Why it works: A broader perspective helps you avoid overreacting to short-term volatility and keeps you focused on long-term wealth creation.
M: Maintain long-term focus
Financial planning is a marathon, not a sprint. Markets reward disciplined investors who stay committed to their goals. For instance, those who held investments through the 2008 Mumbai attacks or the 2019 Balakot airstrike benefited from strong recoveries.
● Action: Rebalance your portfolio if it has drifted from your target allocation, but don’t abandon your long-term strategy. Ensure your emergency fund (3-6 months of expenses) is in place to avoid dipping into investments during volatility.
● Why it works: Staying invested through turbulent periods allows you to capture gains when markets recover, as they did after past India-Pakistan tensions.
India’s history with Pakistan-related tensions shows that markets are resilient, often soaring once fears subside. The Kargil War’s 41% rally is a powerful reminder that clarity brings opportunity. Today, India’s economy is stronger, larger, and better connected globally, making it well-equipped to navigate this turbulence.
“By staying CALM – continuing to invest in large-cap funds, avoiding panic selling, looking at the big picture, and maintaining a long-term focus—you can protect your financial future. Volatility is temporary, but India’s growth story is enduring. As the saying goes, “In volatile times, it’s discipline, not drama, that wins the long-term game,” said Shinghal.
“Periodic portfolio reviews, similar to military readiness drills, help keep your investments aligned with your long-term financial goals and personal risk appetite. Just as careful strategic planning is vital in military operations, meticulous financial preparedness helps investors successfully navigate market turbulence during India-Pakistan conflicts,” added Govila.
Stay informed, stay disciplined, and keep your financial goals in sight. If you need tailored advice or want to monitor specific market developments, consult a financial advisor or follow trusted economic updates.
