In a conversation with ET Now, Jonathan Schiessl from Westminster Asset Management underlined the difficulty in predicting the duration of the conflict and its longer-term economic impact.
“It is very difficult to predict how long this conflict will last… the implications for inflation are going to last for some time.”
Inflation Risks Outlast the Conflict
Even if the conflict were to end soon, its after-effects—especially on energy prices and supply chains—are expected to keep inflation elevated. This could complicate the path for global central banks already balancing growth and price stability.
Relief Rally or Real Recovery?
Markets have rebounded after a sharp correction, but the sustainability of this rally remains questionable.
“Markets were ripe for a counter trend rally… but this situation is a little different with larger implications for commodities and supply chains.”Schiessl suggests that unlike previous geopolitical shocks, this episode may have deeper and more prolonged economic consequences. As a result, investors are using the rally to reduce exposure rather than increase risk.
“We have been taking risk off… and are not very confident about how this will play out.”
Where to Hide? Not an Easy Answer
Traditional safe-haven assets are not offering clear comfort this time around. “The bond markets do not look overly attractive… and gold has probably done its job.”
With bonds under pressure from rising yields and gold having already delivered gains, investors are opting for a more cautious stance. “We are sitting on a little bit of extra cash… until we reappraise the situation.”
Why FIIs Are Pulling Back from India
Despite India’s relatively strong positioning, foreign investors have been trimming exposure due to multiple concerns.
“India is vulnerable to energy price spikes… and there is uncertainty around the tech sector.” The evolving AI landscape, combined with valuation concerns, is also influencing flows. “India still trades at a premium… investors are switching to cheaper markets like China.”
Indian IT: Stable, But Not Without Questions
Even as brokerage reports suggest stability in deal renewals for Indian IT companies, caution persists. “Parts of their businesses will remain successful… but there is a level of uncertainty.”
Schiessl notes that while the sector is not facing an existential threat, margin pressures and potential business disruptions cannot be ruled out.
“There will be some business loss and margin pressure… so we are sitting on the sidelines.”
The Bottom Line
The recent market rebound may offer relief, but it does not signal clarity. With inflation risks rising and geopolitical uncertainty unresolved, investors are prioritising caution.
For now, preserving capital appears to be taking precedence over chasing returns.