Indian stock market: What should be your trading strategy amid ongoing geopolitical tensions?

The Indian economy is storming during the ongoing geopolitical hurricanes. These tests encountered a limited impact on domestic demand, which holds a healthy forecast of average real GDP growth of +7.0% in FY26 and FY27.

However, these are affecting the stock market, led by a rise in volatility trapping investors risk-taking appetite with a rise in global bond yields, upsides to geopolitical risk, and selling from FIIs who are already holding a sell-off strategy on India.

What's driving the Indian stock market?

India began the new year by touching a new market high, but the gains were short-lived following the raid in Venezuela. This event caused bouts of volatility in oil prices and continues to be upbeat, though albeit at a slower pace, amid ongoing uncertainty surrounding other oil-producing nations, including Iran.

Despite this double whammy, the overall impact on the global oil market has been limited. Despite this dual risk, the overall impact on the global oil market has been limited, supported by lower output from both countries, ample global supply, and a subdued demand outlook.

Thus far, domestic unrest in Venezuela and Iran appears to be under control, aided by international intervention and support, which, if sustained, could restrict adverse spillovers into global markets.

This stability is supported by maintained high production from OPEC and the U.S., along with the probability of reopening of the Venezuelan market. Such a scenario is expected to benefit key importers like India and China in the long-term.

Another set of volatility to India was exposed when Trump signed the Russia Act to impose tariffs up to 500% on nations importing oil from Russia. For India, Russian oil was the biggest source of input in 2025, which lately has reduced but continues to be at a good rate estimated holding the third position.

This has affected the performance of the domestic stock market, as both domestic and international investors have been eagerly waiting for a US-India trade deal, which is probably getting extended given the US’s high expectations to tap Russian oil, along with to increase access to domestic Agriculture and Dairy market.

The global geo-political risk further escalated during this week when Trump intended to expand his global rampage to buy out Greenland. Strong opposition from the EU led to Trump proclaiming a new tariff on the EU of up 10%, being used as a mass of weapons. Market concerns eased only after a more measured address by Trump at Davos and the subsequent withdrawal of this fresh tariff threats.

Despite the dampening of the geo-political risk standpoint, the texture of the global cooperation has been damaged. It has affected the overall strength and risk-taking appetite of global equities with an uprise in bond yields. Heavenly metals continue to trade at upticks, though volatility of price movement has increased due to constant uncertainty about policies. The global volatility index and the India VIX index are on rise.

This has enlarged the effect on India, which was already in a sell-off mode, especially for FIIs, due to low earning growth compared to high valuation and abbreviations in the US-India trade agreement. Hence, profit booking is encroaching at every higher level as overall sentiment remains cautious.

What should be your trading strategy?

We advise investors to maintain a measured short-term outlook and avoid panic-driven selling during this volatile phase, as discussions between the U.S. and India continue with a constructive bias.

Additionally, progress on the EU–India FTA represents a forward-looking development that could strengthen India’s negotiating position with the US and others. After the set of weak Q3 results by IT and Banks, there is an encouraging view that the next set of numbers will be better, led by consumer-led demand.

Vinod Nair is the Head of Research of Geojit Investments Ltd.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.