On this issue, Punita Kumar Sinha, from Pacific Paradigm Advisors noted that true safety will only become clear once there is more visibility on how the war unfolds. However, she pointed out that valuations in the Indian market are currently offering some cushion. According to her, markets are trading below historical averages, and any positive development—especially something like a ceasefire—could trigger a meaningful rally. Drawing parallels with past crises such as COVID-19, she emphasized that while the current situation looks grim due to elevated oil and gas prices and ongoing supply disruptions, markets have historically rebounded once uncertainty begins to clear.
The unpredictability of the conflict remains a key concern. As highlighted in the discussion, the war has already stretched into its fourth week, and no one can confidently predict its end. India, being highly sensitive to oil prices, has seen its markets react sharply. When asked about the worst-case scenario, Sinha explained that a prolonged conflict could lead to worsening oil and gas shortages and potential destruction of critical energy infrastructure in the Middle East. This, she warned, would be particularly damaging for India, which relies heavily on energy imports. While the recent correction may feel severe domestically, she pointed out that India has actually fared relatively better compared to several global markets that have seen even sharper declines. Nonetheless, India remains a “collateral damage” in this crisis due to its dependence on external energy sources. She also identified two major shocks impacting markets this year—the global technology disruption driven by AI concerns and the oil shock stemming from the conflict—adding that while these have weighed on sentiment, valuations are now acting as a buffer.
On the earnings front, the situation remains fluid. While analysts have begun trimming estimates, Sinha observed that corporate managements have not yet significantly altered their projections. Since most company budgets were finalized just as the conflict began, there is still uncertainty around how deeply sales and profitability may be impacted. She suggested that while there could be short-term earnings cuts, especially for the current quarter, it is too early to conclude that the entire year will be affected, as conditions could change quickly depending on how the situation evolves.
In terms of demand, she does not see a collapse similar to what was witnessed during the pandemic. While there may be some slowdown if the crisis drags on, the underlying demand environment remains relatively intact. She believes that since the disruption is not India-centric, demand could recover fairly quickly once the conflict subsides. On foreign investor behavior, Sinha highlighted that the impact of the crisis is global rather than limited to emerging markets. Even developed markets like the US have seen significant corrections, particularly in technology stocks. Central banks across the world are now facing a delicate balancing act between controlling inflation and supporting growth. She noted that while the US Federal Reserve appears to be leaning hawkish, emerging market central banks may choose to prioritize growth by maintaining liquidity, even if inflation risks persist in the short term.
Regarding the RBI’s upcoming policy decision, Sinha suggested that policymakers may adopt a more accommodative stance. Since the inflationary pressures are largely driven by external supply shocks, she believes the central bank may focus on supporting the economy rather than aggressively tightening monetary policy. Injecting liquidity, rather than raising rates, could be the preferred approach to cushion the impact.
The sharp correction in banking stocks has also opened up opportunities, in her view. Despite the recent fall in the Nifty Bank index, she remains positive on the financial sector from a long-term perspective. She emphasized that corrections should be seen as opportunities to accumulate quality names, although selectivity remains crucial. Investors should focus on areas where valuations provide a margin of safety, including certain private banks and niche NBFCs that could benefit from their specialized positioning.Overall, the message is clear: while uncertainty remains high and volatility is likely to persist, markets are not without support. Valuations are emerging as a key anchor, and any positive geopolitical development could quickly shift sentiment. Until then, investors would be better served by staying selective and focusing on fundamentally strong sectors rather than chasing short-term safe havens.