In recent days, we've witnessed a series of unprecedented events. While the tragic Pahalgam killings of innocent civilians filled us with horror, the decisive action taken by the Indian Government and the Indian Army, aptly named ‘Operation Sindoor,’ to avenge the loss of many women who lost their partners, has instilled a sense of pride in us.
The economic and financial markets have experienced significant volatility in recent months, with the Sensex plummeting to a 52-week low of 70,234 from a high of 85,978, only to close at 79,454 as on May 9, 2025. It's natural for investors to feel concerned in this tumultuous environment, especially given the uncertainties stemming from Indo-Pak tensions. The obvious question doing the round is, will the market go south wiping out investor wealth and is there cause to panic?
The questions raised are valid, and the concerns are pertinent. While accurately predicting the future of the equity market amid geopolitical tensions is impossible, we can look to past performance for guidance. Have similar situations occurred before? How did the market react? How long did it take to stabilize? These questions can be answered by examining historical events that have shaped our financial landscape.
Consider the Harshad Mehta scam in 1992, which caused the Sensex to crash by 570 points, or the 2008 Global Crisis, when it plummeted by 1,408 points. In both instances, it rebounded within two years. More recently, during the demonetization-induced fall in 2016, the Sensex dropped by 1,689 points, and during the extreme times of COVID-19, it fell by 3,935 points, only to reclaim its levels and rise further within a year. This clearly illustrates that time is crucial in stock market investing; patience and grit always pay off.
Wealth is often created during market downturns. As investment guru Warren Buffett wisely said:
“The best chance to deploy capital is when things are going down.”
“Disinvestors lose as the market falls—but investors gain.”
Given the current climate of fear and uncertainty, here are a few pieces of advice for investors:
1. Exercise Caution: Be fearful only in terms of undue risk during uncertain times. Diversify your portfolio with solid stocks and avoid high-risk options. Stick with mutual funds that have the potential to deliver risk-adjusted returns.
2. Focus on Stability: Large-cap and hybrid funds (like Balanced Advantage and Arbitrage funds) are recommended over small and mid-caps unless you’re planning for the long term.
3. Consider Precious Metals: Gold and silver can serve as effective hedges in uncertain times; however, limit exposure to 10-15% of your corpus. Silver, in particular, is poised for future growth and should be included in your portfolio.
4. Stay Invested: Now isn’t the time for profit booking. Instead, maintain your investments and remain patient. Only book profits if a particular asset class no longer aligns with your risk profile.
5. Continue SIPs: Do not stop your Systematic Investment Plans (SIPs) unless they do not resonate with your investment goals.
As a final thought, remember that equity markets will inherently fluctuate. They will rise and fall, but it’s up to you as an investor to navigate these tides wisely. Stick to your predetermined strategy and resist being swayed by external noise. If you still have concerns, don’t hesitate to reach out.
To quote Warren Buffett once more:
“So smile when you read a headline that says ‘Investors lose as the market falls.’ What looks bad might actually be a good buying opportunity!”
Anupama Bhargava CFP
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