Over the next 2 to 3 weeks, tensions are expected to remain high and our base case is that the current phase of intense military activity will be short-lived, without a possibility of significant military actions.
We don’t see much incentive to prolong the conflict.
India is expected to continue its strong economic growth trajectory, which supports gradual fiscal improvement. Therefore for India, prolonged tensions could deter foreign investment at a time when global businesses are re-evaluating supply chains in a volatile economic environment.
Domestic stock markets will likely go through a brief correction amid the current tensions. It can hit tourism, industrial, and high-beta stocks.
Our equity strategy is already high on stable low beta large caps and sectors that offer right risk reward. So we don’t see a need for a change there.
Our worst case is if the conflict lasts long, we could see material impact on credit ratings and markets can see sharp losses, but with very low probability.
We will be closely monitoring the situation for any entry and exit opportunities.