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Whenever there is a terrorist attack or conflict, like the recent one in Kashmir backed by Pakistan, the Indian stock market becomes more volatile. Just when investors were adjusting after the uncertainties from Trump’s tariffs, the threat of tension between India and Pakistan made many investors cautious. However, according to a research report by the brokerage firm Anand Rathi, the impact of wars on stock markets is not as severe as most people fear. Their study shows that during times of conflict, the Indian equity market usually drops by an average of 7%, with a median fall of around 3%. Except for a few major events, the market usually falls less than 2% during India-Pakistan tensions.
Major Events and Stock Market Reactions
1. Pulwama Attack 2019
After the Pulwama attack, the Indian stock market fell by more than 1.8% between February 14 and March 1, 2019.2. Uri Attack and Surgical Strikes 2016
Following the terrorist attack on an Indian Army base in Uri, and the Indian Army's surgical strikes across the border, the stock market fell by over 2% from September 18 to September 26, 2016.3. Mumbai 26/11 Terror Attack 2008
Surprisingly, during the Mumbai attacks in November 2008, the Indian stock market remained strong. The Sensex rose by about 400 points, and the Nifty gained around 100 points during the two days of attacks.4. Indian Parliament Attack 2001
The Parliament attack caused a brief dip. The Sensex closed 0.7% lower, and the Nifty ended 0.8% down, but both quickly recovered as the situation stabilized.5. Kargil War 1999
During the Kargil War from May to July 1999, the Indian stock market dropped slightly by only 0.8%, showing strong resilience.Key Takeaways for Investors The history of war and stock market volatility in India shows that while there is short-term uncertainty, markets usually bounce back quickly. Investors often focus on the long-term economic growth rather than temporary geopolitical issues. According to Anand Rathi, even if tensions rise sharply, the Nifty 50 index is unlikely to fall more than 5–10%. They advise investors to stick to the 65:35:20 investment strategy — meaning a balanced allocation among different asset classes. If your portfolio is missing equity investments, this could be a good time to invest and align your portfolio with this strategic mix. In times of war-like situations, it is natural for investors to feel anxious about stock market fluctuations. However, history shows that markets recover from short-term shocks and continue their long-term growth journey. Investors should stay calm and avoid making impulsive decisions based on fear. Instead of reacting to daily market movements, it’s important to focus on India’s strong economic fundamentals and long-term growth potential. Consistent investing and sticking to a well-planned strategy can help weather temporary volatility. Remember, successful investors look beyond short-term noise and stay committed to their long-term financial goals, even during uncertain times.
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