On that question, history offers a clear and perhaps surprising answer. Since 2003, Indian markets have been blindsided by at least six wars. Every single time, the initial reaction was fear but the market eventually recovered. The average Nifty return across those six conflict periods was a striking 24%.
The Iraq War of 2003 and the Lebanon War of 2006 produced the sharpest near-term selloffs, with the Nifty falling 2% and 8% respectively in the first week. Yet both episodes delivered some of the strongest one-year recoveries on record, 68% and 41% respectively, as markets repriced once the fog of war began to lift.
More recent conflicts tell a subtler but equally reassuring story. The Russia-Ukraine war of 2022, which triggered fears of a prolonged global energy crisis, saw the Nifty actually edge up 2% in the first week and close 6% higher after a month. The Israel-Hamas conflict of 2023 produced minimal initial damage and a 26% gain over the following year. Even the most recent Iran-Israel episode of 2025, the most directly relevant to India’s current predicament, saw the market hold steady, delivering modest positive returns across all measured time horizons.
If you expand the dataset to include 12 major conflicts since 2000 with direct or indirect relevance for India, through oil shocks, regional spillovers, or direct military engagement, then the data is even more striking as Nifty50 gained over the full duration of the majority of these wars. The median drawdown during the most intense phases was approximately -4%, according to an analysis done by Anand Rathi.
“Indian equities are more sensitive to global monetary conditions and domestic macro fundamentals than to geopolitical developments per se,” Anand Rathi said.
The arithmetic of rising oil is unforgiving for India. Every $1 increase in crude prices adds roughly $1.5–2 billion to the country’s annual import bill. If prices were to approach the $150 bear-case scenario now being discussed, the rupee weakens sharply, the current account bleeds, and FII outflows accelerate.
“The unknown factor now is how long the conflict will last,” said Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments. “This uncertainty will also weigh on FIIs who have again turned aggressive sellers in India after the short bout of buying in February.”
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Why markets stabilise faster than the headlines
Axis AMC’s reading of the past 15 years offers a framework for why recoveries happen at all. The pattern across Arab Spring (2011), Crimea (2014), Uri surgical strikes (2016), Balakot airstrikes (2019), Russia-Ukraine (2022), Israel-Hamas (2023), and Operation Sindoor (2025) is consistent: conflict-driven drawdowns are shallow and temporary, while longer-term returns are dictated by earnings growth, liquidity and domestic demand.
The reason, Axis argues, is structural: “Markets price duration and economic impact, not emotion. Once it becomes clear that supply disruptions are manageable, policy frameworks remain intact and growth is not structurally impaired, risk premiums compress.”
For India, where growth is anchored in domestic consumption, capex recovery, digitisation and manufacturing realignment, geopolitical shocks have historically been interruptions, not inflection points.
Notably, even the Crimea conflict of 2014 saw the Nifty 50 deliver 31% returns that year, driven by domestic reform optimism. Balakot in 2019 had minimal and short-lived market impact as Nifty ended that year up 12%.
Where to hide and where to hunt?
Dr. Vijayakumar’s advice cuts through the noise: “The lesson from history is that the impact of geopolitical issues like conflicts on markets do not last long. Therefore, investors have to be patient.”
His preferred hunting grounds during this uncertainty are domestic consumption plays like banking and financials, automobiles, telecom and cement, which he says will not be materially impacted by the crisis. Defence and pharmaceuticals he flags as relatively resilient. “Long-term investors with high risk appetite can nibble at stocks in these strong themes,” he said.
Axis AMC echoes the broader discipline that investors who exited equities during earlier conflict-driven sell-offs frequently missed the recoveries that followed. The strategy that has consistently worked was that of staying invested, diversifying, and using declines to add to existing holdings.
If history is any guide, the blood on the street today may well be tomorrow’s entry point.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)