Why short-term market volatility rarely changes the long-term view

In the last 25 years the investors have witnessed many geopolitical events creating havoc in markets. From the 1991 Gulf War to the recent West Asia tensions, headlines keep shouting about the crisis. Even now, with global conflicts brewing, the Nifty 50 drops sharply on one tweet from a global leader. But history tells us a solid truth: short-term jhatkas (shocks) from geopolitical events seldom change the long-term wealth creation path for disciplined investors. For you, the patient investor, this isn't just gyaan - it's your roadmap to building wealth.

The pulse of panic vs the reality of returns

Markets are emotional in the short run and rational over time. Geopolitical news triggers fear-driven selling, leading retail investors, often glued to television, to redeem equity funds at the worst possible moment. The numbers, however, tell a different story.  Look at the record. During the 1999 Kargil War, the Sensex delivered a massive 36.9 per cent return over the conflict period from May to July, despite immediate pressure. The 2001 Parliament attack and 9/11 events triggered drawdowns of 13-17 per cent, yet domestic markets recovered swiftly once the fog lifted. Even the February 2022 Russia-Ukraine invasion, which sent the Nifty down 4.7 per cent in a single session, saw the index end the calendar year with positive returns. Across India-Pakistan conflicts since 1999, the average maximum drawdown has been only 5-6 per cent, with six-month rebounds averaging 17 per cent. A 2023 NSE study on 50 geopolitical events since 1990 showed an average Sensex fall of 12 per cent, with 85 per cent recovering in 4–6 months. Markets look ahead; they bake in the worst quickly, then focus on real things like earnings and policy.

 

Why India is different now

Stock prices ultimately reflect corporate earnings, not newspaper headlines. India’s long-term story rests on fundamentals that geopolitics cannot easily touch. These structural growth drivers include a young population powering consumption, steady policy reforms, a resilient services sector, and manufacturing incentives under PLI schemes. Corporate balance sheets are stronger today, and Forex reserves provide a buffer against oil shocks. 

 

Crucially, the "SIP Revolution" has created a massive domestic cushion. We are no longer solely dependent on the whims of Foreign Institutional Investors (FIIs). With monthly Systematic Investment Plan (SIP) inflows now exceeding ₹31,000 crore, the Indian retail investor has become the market's greatest stabilizer - providing that steady desi capital. This means domestic liquidity often steps in to buy the dip, shortening the recovery window. 

The playbook for retail investors

Volatility is just shor shor (noise); earnings are the real dhaaga (thread). For retail investors, the message is practical: Never try to time the market around geopolitical noise - it is impossible to predict escalation or resolution.

Here’s your practical gyaan:

Don’t "Stop" the SIP: Pausing SIPs is the biggest mistake. Rupee-cost averaging makes volatility your friend, allowing you to accumulate more units at lower prices.

 

Asset allocation is key: Maintain a balanced asset allocation suited to your risk profile - typically 60-70 per cent equities for horizons longer than seven years.

  The Gold Rule: Allocate 10–15 per cent to gold. Gold is your insurance policy, providing an "inverse correlation" during crises.

Watch the sectors: While high fuel costs hurt Aviation or Paints, sectors like Defence, IT, and Pharma often show resilience.

Tune out the noise: Review your portfolio once a year, not every headline.

 

Over the past 25 years, despite multiple crises, the Sensex has compounded at approximately 13 per cent annually. Time in the market beats trying to time it. The volatility you see today is the price you pay for the outsized returns you will harvest a decade from now. Stay invested, stay disciplined, and let time do the heavy lifting.  (Disclaimer: This article is by Mandar Bagul, head of research at Scripbox. Views expressed are his own.)