Stock market strategy: Rising tensions between India and Pakistan rattled Dalal Street on May 9, triggering the worst intraday fall in the benchmark indices since April 7, with both falling over 1%. 

The ongoing conflict between the neighbouring countries has dampened investor sentiment amid fears that it could escalate into a broader confrontation. Indian armed forces have been intercepting drones and missiles reportedly sent by Pakistan in attempts to breach Indian territory.

On Friday, the Indian Army reported that Pakistani forces had launched multiple attacks using drones and other munitions along the entire western border on the intervening night of May 8 and 9. These attacks were swiftly neutralized by Indian forces, following similar infiltration attempts at 15 locations across northern and western India.

This escalation follows India’s strike on nine terror camps located in Pakistan and Pakistan-occupied Kashmir (PoK) a day earlier. The Pakistani military claimed that India conducted a series of drone strikes in Lahore, Karachi, and other locations.

The strike by India, coined Operation Sindoor, came two weeks after the Pahalgam terror attack in Jammu and Kashmir, in which 26 people, mostly tourists, were killed on 22 April. High-level meetings are currently underway in Delhi to determine the next course of action, with the defense minister confirming that Operation Sindoor is still ongoing.

Late Wednesday, India’s Ministry of Information stated that its armed forces had “targeted air defence radars and systems at several locations in Pakistan,” adding that “it has been reliably learned that an air defence system in Lahore has been neutralised.”

Amid escalating tensions, experts advise retail investors to stay invested, as India’s structural growth drivers—such as domestic consumption, digital transformation, and policy reforms—are likely to sustain momentum despite the short-term geopolitical crisis.

Analysts decode 5 equity investment strategies during uncertain times

Domestic brokerage firm Bajaj Broking advised that retail investors should avoid impulsive decisions based on short-term geopolitical events. 

The brokerage suggested that investors with a long-term horizon may find opportunities in fundamentally strong stocks at attractive valuations. Exiting entirely may not be prudent unless specific financial goals or risk assessments warrant it.

It listed five key strategies for retail investors to follow:

1) Diversification: Spread holdings across various sectors to minimize risk.

2) Quality Stocks: Focus on large-cap, fundamentally strong companies with low debt and stable earnings.

3) Defensive Sectors: Pharmaceuticals, consumer goods, and utilities often remain resilient during market volatility.

4) Systematic Investment Plan (SIP): Continuing SIPs can help average investment costs during fluctuations.

5) Cash Reserves: Holding some liquidity allows investors to capitalize on future opportunities.

Shrikant Chouhan, Head of Equity Research, said, “Investors are advised to stay cautious, avoid aggressive positions, and focus on fundamentally strong stocks with limited near-term exposure to geopolitical risks. Defensive sectors and quality large caps may offer better stability in the current environment.”

In uncertain times, debt funds offer stability for goal-based investors

Mr. Prasanna Pathak, Managing Partner at The Wealth Company, said, “Structurally, we believe that India is relatively better placed economically amid tariff uncertainty and short-term geopolitical tensions.”

He advised mutual fund investors to stay invested and continue their SIPs. However, he noted that investors who are close to achieving a financial goal should consider shifting from equity to debt funds to ensure capital protection.

“Direct equity investors should trim their exposure to high-beta stocks and avoid speculation. A disciplined and diversified approach, along with a long-term view, is the best defense against such uncertainty,” he added.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.