Geopolitical Tension Create Panic ?

Markets Overview

The last two sessions of the week were notably weak, and after Friday’s market close, the Israel-Iran conflict escalated to a whole new level with direct attacks from both sides. Only Monday’s opening will reveal the true extent of damage this geopolitical event might inflict on the markets. Additionally, reports suggest that the Hormuz Strait has been shut, a crucial chokepoint that handles 20–30% of global oil shipments. Oil market experts are warning that prices hitting triple digits is no longer out of the question.

With that backdrop, markets may face considerable turbulence in the upcoming week, especially if oil spikes sharply on Monday. The extent and duration of this conflict remain uncertain, but there’s hope that cooler heads will prevail and a ceasefire might emerge by the end of the weekend. Regardless, it’s clear that geopolitics is becoming messier and more unpredictable by the day.

The world is no longer the relatively peaceful place it was not so long ago. Constant conflicts and tensions are now becoming a norm, underscoring the growing need for proper asset allocation and hedges. Fortunately, India remains in solid shape.

The domestic economy is showing robust growth, inflation is under control, domestic flows are healthy, and the outlook is validated not just by the RBI but also by international institutions like the IMF. There’s little reason to doubt the structural path India is on, but given the external uncertainties, that path may become somewhat bumpy in the near term.

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Nifty saw a substantial drop, adding to an already volatile week with no signs of relief from persistent negative news flow.

Tensions in the Middle East escalated sharply today as Israel launched an attack on Iran, followed by a swift counter-response. Reports suggest around 100 drones were deployed, raising concerns of further escalation in the days to come.

As the market continues to absorb the shockwaves from this geopolitical development, the broader sentiment remains fragile. After reeling from Thursday’s sell-off, Friday brought yet another blow, capping off a particularly tumultuous week.

Rebalance Update for the week