Portfolio alert! Nifty 50 cracks 5% since US-Iran war began — where should investors park money now?

Indian stock markets have lost almost 5% since the start of the US-Iran war. There have been promising days of recovery but overall sentiment remains strongly negative for the markets, domestic as well as global.

Just in today's deals, Sensex and Nifty 50 declined over 1% each as the ongoing US-Iran war kept market sentiment cautious. Banking, financial services and auto stocks led the losses, dragging the frontline indices lower during the session. The Sensex fell more than 1,000 points, or about 1.3%, touching an intraday low of 77,161. Meanwhile, the Nifty 50 dropped 1.20% to hit a day’s low of 23,971.60.

This comes after a strong rebound in the previous session on falling oil prices and hopes of the war nearing an end.

Oil prices have remained sharply below $90 after almost touching $120 on Monday. Such spikes have been rocking financial markets worldwide because of worries that the war could block the global flow of oil and natural gas for a long time. Moreover, support after the G-7 group of nations asked the International Energy Agency (IEA) to prepare plans for a potential release of emergency oil reserves also eased supply pressures.

Against this backdrop, market participants are increasingly focused on how investors should respond to such geopolitical shocks.

What should investors do?

Geopolitical conflicts often trigger sharp market volatility, but experts say history suggests that long-term investors should remain disciplined rather than react emotionally to short-term events.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said history shows that wars and geopolitical tensions typically have only a temporary impact on markets.

“The lesson from history is that geopolitical issues like wars will have only short-term impact on the economy and markets. Therefore investors should remain invested and continue with systematic investment,” Vijayakumar said.

He added that corrections triggered by such events can often create attractive buying opportunities, particularly in sectors with strong growth prospects.

Market strategists also emphasised the importance of maintaining a long-term perspective during geopolitical crises.

Moroever, according to Axis Asset Management, geopolitical crises have repeatedly tested market sentiment but rarely changed the long-term trajectory of Indian equities.

“The US – Iran - Israel conflict is a serious geopolitical event, but for Indian investors it is not unprecedented. Over the past 15 years every major conflict has tested sentiment, yet Indian equities have repeatedly demonstrated resilience over time,” the firm said.

Axis Asset Management further noted that markets may initially react negatively through falling equities, weaker currencies and rising oil prices. However, it said fundamentals tend to regain importance over time.

The firm also advised investors not to exit equities during periods of panic, pointing out that those who sold during previous geopolitical crises often missed the subsequent market recovery.

How to position your portfolio?

While experts recommend staying invested, they also suggest adjusting portfolios to better navigate periods of geopolitical uncertainty.

Kotak Investment Advisors said investors should tilt their portfolios toward sectors that are more resilient during volatile global conditions.

“It is advisable to rebalance portfolios toward more domestic-oriented sectors and companies with strong balance sheets, pricing power and demand visibility, which can recover faster once geopolitical risks begin to subside,” the firm said.

Kotak Investment Advisors added that sectors such as large private banks, NBFCs, telecom, healthcare and metals could offer relatively stronger prospects in the current environment.

Similarly, ICICI Direct recommended positioning your portfolio around domestic demand-driven sectors such as banks, infrastructure, capital goods, cement, automobiles and discretionary consumption, which are less exposed to global shocks.

Meanwhile, according to Vijayakumar, the recent market decline has made valuations in several large-cap stocks more reasonable, while sectors such as financials, automobiles, pharmaceuticals and defence continue to offer strong long-term potential.

For investors navigating the current uncertainty, the key takeaway from experts remains clear: geopolitical shocks may create volatility, but disciplined investing and diversification have historically proven to be the most effective strategy.

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