“It is a tough market to navigate specifically over the last few weeks,” says Mayuresh Joshi, Head of Equity at Marketsmith India. “And there is nothing on the horizon in terms of de-escalation as we speak right now.”
ETMarkets.comWhy this feels different from past pullbacks
The concern among market veterans is not just about short-term volatility — it is about second-order effects. If the Middle East conflict lingers, the chain reaction is clear: energy costs stay elevated, input costs for businesses rise, consumer demand softens, and inflation re-enters the global macroeconomic picture at a time when central banks had only recently begun to ease.
For India specifically, the risks are compounded. As a major net oil importer, prolonged high crude prices translate directly into imported inflation, a widening current account deficit, and fresh pressure on the rupee — all of which feed into tighter financial conditions domestically.
“The fear for the market is that if this elongates further, inflationary headwinds come back into global macros — and Indian macros along with them.”
Analysts are also flagging a possible stagflation scenario — the grim combination of stagnant growth and rising inflation — as something that could materialise across multiple geographies if the conflict is not resolved within weeks. It is a word most investors hoped not to hear again after 2022, and its re-emergence reflects how quickly the global economic mood has shifted.
The counterintuitive move: Do nothing (strategically)
In an era where algorithmic trading rewards speed and retail investors feel pressure to act on every signal, the advice from Marketsmith is deliberately contrarian: doing nothing is a valid strategy — but only if paired with purposeful preparation.
Their approach is to stay on the sidelines, wait for clear macro signals from incoming data points, and use the current period to build high-conviction watchlists. The logic is disciplined: entering too early in a volatile, directionless market locks up capital and generates losses. But being unprepared when the turn comes means missing the sharpest part of the recovery.
What to do if you are already fully deployed
The harder conversation is for investors who were fully invested heading into this downturn. Notional losses on recent positions are, as Joshi puts it, “a stark reality — there are no two ways about it.”
The framework for navigating that reality depends on the quality of what you hold. Strong businesses in sectors with resilient earnings — those with limited exposure to rising input costs or global demand cycles — are worth holding through the volatility. But speculative positions taken on FOMO or short-term momentum? Those deserve a harder look, even if cutting them means crystallising a loss.
“Even if you take these stocks out while you are bleeding and replace them with better earnings-growth candidates from your watchlist, the ROI over the next few quarters will still be superior”. says Joshi.
The rationale is straightforward. When markets recover — and they will — the strongest bounce will come in high-quality names with visible earnings trajectories, not in speculative small-caps that ran on sentiment. Reallocating now, painful as it feels, positions investors to participate in that recovery more effectively.
Sectors worth adding to your watchlist now
While Joshi stopped short of naming specific stocks in the current environment, the filter criteria are clear: look for businesses with strong earnings visibility over the next two to three quarters, limited dependence on global commodity cycles, pricing power that offsets input cost pressures, and domestic consumption exposure rather than export sensitivity.
Healthcare, certain domestic-focused financials, and infrastructure-linked sectors with government-backed order books tend to screen well under these criteria during geopolitical stress cycles. Consumer staples with proven pricing power also offer defensiveness, though valuation premiums have compressed their upside.
Investor action checklist for a volatile market
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The bigger picture: Patience as a competitive advantage
What the current environment is ultimately testing is investor psychology. “The classical saying is that this too shall pass,” Joshi reminds his clients. Markets have absorbed geopolitical shocks before — and each time, the investors who maintained discipline, preserved capital, and entered at the right inflection point came out ahead.
The data is consistent on this point: the biggest single-day recoveries in equity markets almost always occur within weeks of the sharpest drawdowns. Investors who exit in panic miss both the income from holding quality stocks and the recovery gains. Those who used the selloff to upgrade their portfolios — swapping weak holdings for stronger ones — came out with better long-term returns than those who simply waited it out passively.
Right now, the opportunity is not in trading the volatility. It is in using the quiet to build a list of businesses you would want to own at the prices that fear is creating.