D-Street shrugs off stock crash, says portfolio is not red, but Tiranga today
This is not the first time stocks have reacted negatively to skirmishes on the Indo-Pak border.
Sensex recorded the biggest drop in two months in opening trade amid conflicting news from both sides of the border, but recovered substantially by midday as the situation became clearers.
Markets traditionally abhor geopolitical tensions, which is what probably explains stock investors run for safety this morning. But investing veterans say such uncertain times throw up the best opportunities to make money in the market.
Legendary investor Warren Buffett is known to have made his early fortunes by betting on stocks in the shadows of World War III and through the Cold War. “If you tell me that (war) is going to happen, I will still be buying the stock,” he once told a business news channel. “During World War II, the stock market advanced -- the stock market is going to advance over time,” Buffett said.
The Indian Air Force carried out multiple aerial strikes at major terror camps in Pakistan Occupied Kashmir 12 days after the ghastly terror attack in Pulwama.
Market analysts said while the move may have geopolitical ramifications, it could also be an opportunity to buy stocks cheap.
“We have seen this kind of situation in the past. This a temporary blip for the investor,” said Vijay Kedia, a Dalal Street veteran. “As a citizen of India, I would say country is important than the stock market. My morale is at all-time high after India’s answer to Pakistan.”
Kedia says the incident actually offers a positive news for the market. “The retaliation is a blessing in disguise for the present government, which is again positive for the market.”
Value investor Gaurav Sud also said the incident increases the probability of Modi coming back to power, which means a stable government. “I am positive on the market,” he said.
This is not the first time the market has reacted negatively to the news of skirmish on the Indo-Pak border.
Historical data shows the market is by and large immune to such border events from a long-term perspective. On January 2, 2016, when six highly-armed terrorists attacked the Pathankot base of Indian Air Force and a gun battle ensued for three days, Sensex had cracked over 1,300 points in four sessions, slipping to 24,851 on January 7, 2016 from 26,160 on January 1.
Likewise in September 2016, the 30-share Sensex dipped over 70 points in two sessions following the Uri attack, in which heavily-armed militants had attacked an army base in north Kashmir early on September 18 and killed 18 soldiers.
The benchmark indices took a hit after Defence Ministry confirmed that India conducted surgical strikes on Pakistan-based terrorist camps on September 28 in the aftermath of the Uri attack. The Sensex plummeted 465 points to 27,827 on September 29, 2016 from 28,292 on September 28, 2016
But on all these occasions, the market bounced back within days.
Shyam Sekhar, founder, iThought said, “I am not worried about tension between India and Pakistan. Pakistan is not in a position to go for war. It does not even have the money to buy base fuel for two weeks. They do not have the money for war, that is why they are doing these kinds of terrorist activities. I would definitely invest in equity for another 15 months. However, there should be no hurry to buy midcaps. One should buy quality beaten-down largecap stocks.”