India-Pakistan Tensions May Rattle Markets Briefly But Unlikely To Derail Rally: Samir Arora
Indian markets could fall 2% in the near term but similar sell-offs in the past have reversed quickly, he noted.
Helios Capital’s Samir Arora says foreign inflows could support Indian equities in the coming months, even if geopolitical jitters cause short-term volatility.
Amid escalating tensions between India and Pakistan, Arora told NDTV Profit he does not expect the situation to spiral into a full-blown war and believes any market correction would be short-lived.
“There may be some panic at the market open, but this is unlikely to turn into a military conflict. Both sides are relying on remote targeting and drones. Eventually, Pakistan will look for a way out,” he said.
Indian markets could fall 2% in the near term, he said, but pointed out that similar sell-offs in the past have reversed quickly. “You can’t base a market strategy on low-probability geopolitical events. Long-term investors should stay the course.”
Arora said investors who continued their systematic investment plans during the recent market correction have already benefited from the rebound.
Samir Arora, Founder and Group CIO. (Image source: Helios Website)
Foreign Inflows May Accelerate
Arora said Indian equities may enter a phase where both domestic and foreign investors are buyers. “Foreign institutional investors are rethinking their exposure to the US, which now makes up nearly 70% of the MSCI World Index, much higher than the long-term average of around 55–60%. Even if the US continues to do well, global investors are looking to diversify,” he said.
India stands to benefit as a significant non-US destination for capital reallocation, he added. “Over the last two years, domestic investors were buyers while FIIs were selling. Now we may see both stepping up to buy—this is a powerful setup.”
Financials Likely To Lead
Financials remain a strong candidate, according to Arora. “Financial stocks have underperformed in recent years and are familiar to foreign investors. Many had trimmed exposure earlier and could now return to these names.”
He also expects some selective buying in consumer and infrastructure sectors, but said valuations are not cheap and gains may be capped. “We won’t see a 30% rally from here, but 10–15% upside is possible if earnings growth holds up.”
Arora also advised investors with some cash on hand to deploy cautiously. “Maybe buy a little today depending on your risk appetite, but there’s no rush. If you’re 3–5% in cash, it’s fine to wait. Long-short managers may use this as a chance to cover some shorts.”
India Well-Placed In Global Trade Realignment
On global trends, Arora said India is seen as being on the right side of global trade realignments. Deals like the India-UK trade pact and gradual shifts away from China could benefit sectors like textiles, though the impact may be marginal, he said.
“I don’t think large foreign flows will go to China. Even if valuations are attractive, China cannot fully substitute for US exposure. If global investors trim US holdings, most of that money will go to a broader basket that includes India.”
On potential tariff reductions under the Donald Trump administration, he said, “Even if the tariff on Chinese goods comes down to 50–60%, it’s manageable. But investors hoping for a drop from 135% to zero will be disappointed.”
While geopolitical risks may weigh on sentiment in the immediate term, Arora said investors should avoid panic selling. “History shows markets bounce back after such events. Unless this escalates dramatically—and I think that’s unlikely—the rally remains intact.”
Catch latest updates on India-Pakistan tensions here.
