The Impact of Historical Wars on India’s Economy and Financial Markets: Three Secrets to Stay Confident Amidst Geopolitical Tensions- By Taresh Bhatia CFP

Hello, I am Taresh Bhatia, your CERTIFIED FINANCIAL PLANNER and coach at The Richness Academy. Today, I am reaching out to address the concerns arising from the recent events on May 8-9, 2025. These events involved Pakistan’s violations of the ceasefire agreement and an attempted bombing, which have led to heightened geopolitical tensions. As these events unfold, many of my mutual fund clients have reached out to ask: “What is happening next? Should we be concerned about our investments?”

I understand that these events may cause anxiety. It is entirely normal to feel uncertain during such times. However, history has shown us that geopolitical events, although unsettling, are often temporary disruptions. Here is a summary of what has happened, what may lie ahead, and why you should continue staying invested.

Investor Anxiety:

With global tensions on the rise, particularly concerning Pakistan and its recent violations, many investors are understandably worried about the potential impact on the Sensex and the Indian economy. You may be asking: “Will there be a market crash? Should I sell my mutual funds? What should I expect in the coming months?”

These questions are valid, but it is crucial to step back, analyse the situation from a broader perspective, and focus on long-term financial growth rather than reacting to short-term fluctuations.

What Happened:

As of May 9, 2025, the Sensex ended the day down by 880.34 points, closing at 79,454.47. While this may seem concerning, such corrections are not unusual during times of geopolitical uncertainty. Historically, India has experienced similar dips during times of conflict, yet the markets have consistently recovered.

Impact of Historical Wars on India’s Economy and Financial Markets:

India has faced several geopolitical conflicts, and while they caused short-term disruptions, the long-term growth trajectory of the economy has remained strong. Here is a look at the economic impact of past wars:

• Sino-Indian War (1962):
  Impact on Economy: GDP dipped in 1962 due to trade disruptions and military expenditures.
  Recovery: India rebounded quickly and resumed its growth, continuing its upward trajectory.
• Indo-Pakistani War (1965):
  Impact on Economy: The economy faced inflationary pressures and fiscal strain.
• Bangladesh Liberation War (1971):
  Impact on Economy: This war caused military spending and some inflationary pressures.
  Economic Resilience: Despite the conflict, India’s economy continued to grow, driven by post-independence industrialisation.
• Kargil War (1999):
  Impact on Economy: The short-term impact on GDP and inflation was minimal.
  Market Volatility: While the market faced volatility during the war, it ultimately grew, and the Sensex rose during this period, showing resilience.

Why Investors Should Not Panic:

The historical pattern is clear – while geopolitical conflicts may create short-term volatility, they do not derail India’s long-term economic growth. Here is why you should stay calm:

1. India’s Long-Term Growth: India’s economy has consistently grown despite past wars. The GDP has more than doubled in recent decades, and markets have bounced back from periods of geopolitical uncertainty.
2. Diversified Economy: India’s diverse economy, with strong sectors like technology, agriculture, and pharmaceuticals, helps cushion the impact of geopolitical tensions. Even during times of conflict, these sectors provide stability.
3. Government and RBI Support: The Indian government and the Reserve Bank of India (RBI) have proven effective in managing the economy during times of crisis, with tools to control inflation, liquidity, and fiscal deficits. They will likely intervene if necessary to stabilise the markets.

Three Secrets to Stay Confident:

Secret #1: India’s Economic Resilience –

As seen during past wars, India’s economy is resilient. The Kargil War in 1999 is a prime example of a time when, despite military conflict, the market showed strength and continued to grow. Short-term disruptions are regular, but India’s long-term growth remains intact, providing a secure foundation for your investments.

Secret #2: Volatility = Opportunity –

Market corrections, which are temporary declines in stock prices, are a normal part of the market cycle. During geopolitical crises, these corrections provide opportunities to invest at lower prices. If you are concerned about the volatility, continue your SIPS (Systematic Investment Plans) and take advantage of market dips.

Secret #3: Focus on Long-Term Goals –

During times of uncertainty, it is important to stay focused on your long-term financial goals. Avoid trying to time the market during these events. The markets will recover, and your investments will grow in the long run if you stick to your strategy, giving you hope for the future.

As a Certified Financial Planner, I believe that strength and stability are crucial elements in investment management. My approach to guiding my client’s portfolio is based on a disciplined investment process and a strong risk management framework. I am committed to identifying high-quality businesses with resilient earnings, strong governance, and sustainable growth potential.

I maintain a positive long-term outlook on India’s economy, driven by structural reforms, robust domestic demand, digital transformation, and India’s demographic dividend. These foundational factors form the bedrock for identifying investment opportunities across various sectors, no matter the market cycle.

Using Predictive Analytics and a risk-mitigating framework, I carefully monitor both global and domestic developments. This ensures that the asset allocation and security selection strategies I recommend are well-positioned to navigate periods of uncertainty, without sacrificing your long-term investment returns.

I continue to invest with conviction in the India Growth Story—backed by comprehensive research, careful strategy, and aligned with your unique financial goals. I remain positive on sectors such as energy, domestic infrastructure, hospitality, financial services, retail, telecom, healthcare, and generics, all of which are key drivers of India’s economic momentum.

Also read: How to Manage the 6 kind of Behavioural and Emotional Biases in Your Journey to Richness

Conclusion:

I understand various concerns, but historical data and India’s economic fundamentals show that geopolitical risks should not cause panic. The market may face short-term volatility, but India’s growth story remains strong. Stay calm, stay invested, and continue with your long-term strategy.

In light of the recent geopolitical developments between India and Pakistan, I understand that many investors may feel a sense of apprehension. My thoughts are with all those affected, and we stand in solidarity with our armed forces ensuring our nation’s security. As your trusted investment partner, we would like to share our perspective on the current situation and reaffirm our conviction in the resilience of the Indian economy and strength of the Indian Armed Forces.

• First, India has for long demonstrated a strong and credible defence capability. The country’s security institutions remain vigilant and well-prepared to safeguard national interests, ensuring stability and continuity even in challenging times.
• Second, Indian resilience extends beyond defence. India’s economy has historically shown the ability to withstand external shocks and emerge stronger. Historically, India has navigated through geopolitical tensions with a strong sense of stability, supported by robust domestic demand, a diversified economy, and prudent fiscal management.
• Third, India’s active pursuit of Free Trade Agreements with key global partners marks a structural shift toward deeper economic integration and export-led growth. These agreements not only open new markets for Indian businesses but also enhance competitiveness and attract long-term foreign investment.

India’s geopolitical stance is anchored in strong global partnerships, effective diplomacy, and military preparedness. With constructive trade relations across major global blocs and a resilient domestic economy, the impact of current tensions is expected to remain far more contained, offering a relatively stable environment for investors. While short-term market volatility is natural in times like these, we believe that the fundamental growth story of India remains intact. As India positions itself as a critical node in global supply chains, we believe that long-term investors will benefit from this rising economic momentum.

I understand diverse concerns, but historical data and India’s economic fundamentals show that geopolitical risks should not cause panic. The market may face short-term volatility, but India’s growth story remains strong. Stay calm, stay invested, and continue with your long-term strategy.

If you have any concerns or want to discuss your portfolio, please contact us. We’ll navigate these uncertain times and continue working toward your financial freedom.

Disclaimer:

The information provided in this article is for educational and informational purposes only. It is not intended as financial advice, and readers should consult with a certified financial planner or investment advisor before making any investment decisions. Past performance is not indicative of future results. Investments in mutual funds and other financial instruments are subject to market risks. The views expressed are solely those of the author and do not reflect the opinions of any institutions or organizations.

Disclosure:

Taresh Bhatia is a Certified Financial Planner (CFP) and the founder of The Richness Academy. This article is part of his ongoing efforts to educate and empower individuals to achieve financial freedom through smart investing strategies. For more insights, please visit and register for my next webinar at www.tareshbhatia.com.

For personalized financial advice, you can reach out to me directly at taresh@tareshbhatia.com