Avoid panic and stay invested in large-cap funds, keep a multi-asset approach with about 5-10% in gold: MF experts

Avoid panic and stay invested in large-cap funds with a multi-asset approach and keep a 5-10-% percentage in gold in geopolitically tensed times say MF experts. Though the benchmark stock markets shook off with early jitters reacting to ‘Operation Sindoor’—a strike by the Indian armed forces on nine terror hubs in Pakistan and Pakistan-occupied Kashmir (PoK) but remained steady, despite a major overnight Indian military operation that heightened geopolitical tensions.

As per experts, historical data seems to show that, whenever such skirmishes have happened between India and Pakistan, it has had very short-term impacts on equity markets, which means over longer periods which is after six months to a year there is very minimal effect.

Col. Sanjeev Govila of Hum Fauji Initiatives says that Indo-Pak military tensions have created predictable market patterns worth understanding. During previous conflicts—Kargil (1999), Parliament Attack (2001), Surgical Strikes (2016), and Balakot (2019)—markets initially demonstrated volatility before stabilizing. The typical correction ranged between 5-10%, followed by recovery periods spanning two to six months depending on conflict intensity.

He suggests to investors that within equities, defence sector merits strategic consideration at this time. Companies supporting military operations often receive increased orders and budget allocations during conflicts, potentially outperforming broader markets. He said, “Large-cap companies with predominantly domestic revenue streams and minimal supply chain exposure along with fixed income securities, particularly sovereign bonds, and high-quality corporate debt could be looked at at the current time. Other sectors include pharmaceutical and FMCG sectors as their demand remains relatively inelastic regardless of geopolitical developments.”  

Apart from this investors must keep an eye on key triggers like Pakistan's response to India's airstrikes, statements from major powers like the US, China, and Russia which could influence market sentiment significantly, foreign portfolio investor behaviour during the first 7-10 days following military actions as it establishes medium-term trends and lastly any announcements regarding increased defence allocations that could impact fiscal deficit projections, potentially influencing interest rate trajectories and bond yields must be watched out for.

Sensing opportunity in these uncertain times, Akhil Chaturvedi, Executive Director, and CBO, Motilal Oswal MF suggested that any corrections or volatility in the markets should be used as an opportunity to invest to benefit from buying good businesses at lower prices and better valuations. Currently, investors can be skewed towards large caps, gold and multi assets funds can be preferred at this time, he adds.
Mumbai RIA Vishal Dhawan of Plan Ahead Wealth Advisors says that investors should not be very active in trying to do many things in their investment portfolio in panic, which probably is not warranted and therefore they should stay and stick to their strategic asset allocation.

He said, “Avoid stopping SIPs as the whole idea around the SIP is that you continue to invest irrespective of how the markets are doing at that point. Don't try to predict what's going to happen in the markets at a point.” Dhawan advised that allocation-wise large cap or using hybrid strategies like balanced advantage funds is preferable and avoid mid and small-cap companies because they continue to be overvalued despite the correction that has happened.

He said, “Avoid chasing the higher returns of gold because the returns of gold are higher than what they have normally been and therefore it may not be a good idea to chase the returns just keep the gold allocation upto 5-10%.” He added that investors must keep an eye on oil prices which have been dropping lately, and tariff implications apart from India-Pakistan war escalations at the current time.

Remaining positive on the India growth story Sandeep Bagla, CEO, Trust MF also reiterates that there are majorly two major things that we need to watch out for tariffs and war escalations with Pakistan. Speaking about the effect of tariffs and trade war he says “India is likely to emerge as a relative gainer once the tariff scenario plays out. While tariffs are undesirable and will only decrease economic efficiencies, India could emerge unscathed. In this period of uncertainty, my advice to investors would be to stay put, correct their asset allocation, and invest incrementally in a phased manner.”

According to Bagla, one should invest in a portfolio that has both exposures to more stable fixed-income instruments and to growth-oriented equities as well. Investors can increase a bit of exposure to gold as it can potentially outperform in uncertain times.

Kalpen Parekh, MD and CEO, DSP MF advices investors to stay disciplined and not be greedy to chase hot stocks and sectors as valuations are high in the current equity markets. He says, “We are hopeful for equities in the long run for equities, hybrid and multi-asset funds are the right choices for lump sum investing right now and flexi caps are best for SIPs.”

Agreeing to Parekh, Vaibhav Chugh, Director and Head Sales, WhiteOak Capital MF says, “Multi asset allocation funds where you can get exposure to debt and gold alongside equity along with staggered investments into flexi cap funds will be apt products for investors at this moment. Also, quality factor will do well going forward, and hence one must look at quality funds.”

Chugh advices investors that time has proven that no one can time events and thus the best way to navigate times is to have a portfolio which is diversified and maintain asset allocations. Not doing anything would be the right thing to do as per him.