Operation Sindoor: Don't panic, stay invested in Indian stock market, says Kotak MF

Operation Sindoor: India striking nine Pakistan terror targets may have made stock investors a bit cautious over the likely flaring up of geopolitical tensions, Kotak Mutual Fund said it may not be the right time to panic. It asked stock investors to avoid knee-jerk decisions and stay invested. 

Short-term market swings during geopolitical events are unsettling, but history shows that they rarely derail India’s long term growth story, the mutual fund house said. 

"It is difficult to predict the market direction. However, the last major conflict have triggered temporary drawdowns before markets rebounded. Staying invested and avoiding knee-jerk decisions may be prudent for long-term wealth creation," Kotak MF said.

In the long term, the macro-economic factors and corporate earnings drive the stock market performance, Kotak MF said adding that one may consider top up of SIP plans. In the case of lumpsum, it advised mutual fund investors consider adding investments in a staggered way. 

"We have seen two such surgical strikes since 2016 (Uri and Balakot) and the impact on markets have been limited," the mutual fund house said in a note.

The Uri Surgical strike of 2016 and Balakot airstrike of 2019 saw the domestic stock market staying rangebound on the day of strikes and delivering one-year returns of 11.3 per cent and 8.9 per cent, respectively, post the strikes.

"The government action suggests there is low possibility of a war. However, in case of a full-blown war, we must note that since 1950, India has seen 4 major wars. In the last major conflict (Kargil-1999), the equity markets have remained robust after an initial panic," Kotak noted.

Kotak MF said a limited conflict may have limited impact and that market may stabilise soon. In the case of prolonged conflict, some correction would not be ruled out, it said.

"In the past conflicts, while there has been limited impact on growth, we have seen increase in inflation and fiscal deficit," it said.