West Asia turmoil: How to navigate current mkt correction, where to invest?

Escalating tensions in West Asia have kept Indian investors on edge, triggering a sharp correction. From February 27, when the conflict intensified, both indices have fallen by over 7 per cent. 

Despite the sharp pullback, analysts reckon that the current weakness reflects a geopolitics-driven correction rather than a structural bear market. 

Given this backdrop, analysts believe earnings momentum and domestic growth will underpin the next phase of the rally once the markets stabilise. 

Ravi Singh, chief research officer, Master Capital Services, expects themes such as consumption, financial services, and capex-linked sectors to drive the next leg of gains. 

However, he cautioned that near-term returns may remain tepid and volatility could persist as long as uncertainty around crude prices and the duration of the conflict lingers. Such phases, he added, often provide disciplined investors with opportunities to accumulate fundamentally strong businesses. 

 

Tanvi Kanchan, associate director, Anand Rathi Share and Stock Brokers, suggests investors remain selective, focusing on companies with strong balance sheets and clear earnings visibility. 

She sees opportunities emerging in financials, consumption, and automobiles, where recent valuation corrections appear driven more by sentiment than by any meaningful deterioration in fundamentals. 

Meanwhile, since February 27, among top sectoral losers, Nifty PSU Bank fell 13 per cent, Nifty Auto tanked 10.9 per cent, and Nifty Oil & Gas slipped 9.6 per cent. 

Since the start of the West Asia conflict, Brent crude oil prices have remained elevated, which has led to worries around inflation, gas, and fuel shortage, affecting banks, auto, and oil & gas sectors, according to analysts.  

A report by JM Financial suggested that an inflationary surge in the developed markets due to geopolitical tensions could halt the rate cut cycle, which may impact the rate sensitivities.  

“Original equipment manufacturers (OEMs) operating at high capacity utilisation levels and having limited vehicle inventory could be at a higher risk of some production loss due to gas shortage amid West Asia conflict,” said Nomura.

Stock Market recovery

Meanwhile, historical trends indicate that geopolitical disruptions tend to spark short-term volatility, but Indian equities tend to rebound swiftly once clarity emerges. 

According to a smallcase report, the 2023 Israel–Hamas escalation triggered a brief 4–6 per cent correction that was fully reversed within a month, followed by strong gains over the next six months. Similarly, US–China trade tensions and technology restrictions led to periodic declines of 5–8 per cent, though markets typically stabilised within two months as investors reassessed long-term prospects. 

Regional flare-ups have had limited and short-lived effects as well. During the India–Pakistan military escalation in May 2025, markets dipped 2–3 per cent before quickly recovering. Likewise, concerns over new US tariffs on Indian imports in 2025 were largely absorbed by strong domestic growth drivers and sustained investor participation. 

Beyond episodic volatility, Indian equities have delivered consistent long-term returns. Over the past four years, markets have generated a compound annual growth rate (CAGR) of around 12.7 per cent, broadly aligned with historical averages, Smallcase noted.  Disclaimer: The views and investment tips expressed by the analysts/brokerage are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.