Indian equity markets are navigating a fresh bout of volatility as geopolitical tensions between the United States, Israel and Iran drive oil prices higher and trigger risk aversion across global markets. The Sensex has hovered below the 80,000 mark during the recent pullback, raising concerns among investors about the near-term outlook for equities.

Yet market participants speaking at Moneycontrol’s Financial Distributor Expo 2026 argued that such phases of uncertainty are not unusual for investors and should be assessed against India’s broader economic trajectory.

During the panel discussion titled Navigating Uncertainty Surviving Volatility, moderated by N. Mahalakshmi, investment professionals highlighted that geopolitical flare-ups and commodity shocks have historically caused short-term corrections but rarely derail India’s long-term equity performance.

Vikas Khemani, founder of Carnelian Asset Management, said uncertainty has always been a constant feature of financial markets. According to him, investors frequently face concerns ranging from elections to global conflicts, yet markets eventually absorb these shocks.

He pointed out that India’s equity market has historically generated annualised returns of around 17–18 percent over long periods, positioning the country among the few emerging markets that have consistently delivered strong wealth creation.

From a macro perspective, Khemani argued that the current geopolitical situation primarily affects India through energy prices. If the conflict were to remain limited in duration, the economic impact could remain contained.

Oil remains India’s most significant external vulnerability because the country relies heavily on imports to meet domestic demand. A sharp rise in crude prices typically widens the current account deficit, pressures the rupee and raises inflation risks. However, Khemani suggested that unless the conflict persists for several months, the economic damage may be temporary.

He also emphasised that India’s macroeconomic indicators currently appear relatively stable. The banking system has strengthened in recent years, inflation has moderated compared with earlier cycles, and both fiscal and current account balances remain manageable by historical standards.

In terms of equity markets, Khemani described the ongoing correction as relatively modest. According to him, markets may experience a temporary “dent” of roughly five to seven percent, much of which may already be reflected in prices following the recent pullback.

Rajesh Bhatia, Chief Investment Officer at ITI Mutual Fund, broadly agreed that India’s macroeconomic framework remains resilient. He highlighted improvements in banking sector balance sheets and financial stability compared with earlier economic cycles.

However, Bhatia added that valuation levels across certain segments of the market remain elevated. Mid-cap and small-cap stocks in particular have attracted strong passive investment flows, pushing valuations above long-term averages.

Another challenge, he noted, is that global investor interest has recently shifted toward sectors such as artificial intelligence and commodities, areas where India currently has relatively limited exposure. As a result, foreign portfolio inflows into Indian equities have been somewhat muted.

Bhatia cautioned that a prolonged period of high oil prices could alter the macroeconomic picture. If crude prices were to remain in the range of $100–$120 per barrel for an extended period, the resulting pressure on India’s current account and fiscal position could trigger broader market corrections.

Historically, he noted, major declines in Indian equities tend to occur when macroeconomic imbalances emerge. Higher oil prices could affect inflation, the balance of payments and currency stability if sustained for long periods.

Given the current valuation environment, Bhatia suggested investors may benefit from a more patient approach before deploying fresh capital. Instead of reacting to market volatility, investors should focus on identifying sectors where corrections have brought valuations back to attractive levels.

He pointed to segments such as real estate, electronics manufacturing services and specialty chemicals as areas where valuation resets could create selective opportunities.

Bhatia also highlighted long-short equity strategies as a potential approach during uncertain market conditions. Such strategies aim to reduce downside risk during corrections while still allowing participation in market upside.

From a different perspective, Vijay Kuppa of InCred Money discussed the impact of volatility on the unlisted and pre-IPO investment space. According to him, sentiment in these segments tends to move closely with the listed market but often with greater swings.

During the previous market upcycle, strong demand in the unlisted market had pushed valuations to levels that were sometimes higher than eventual IPO prices. With the pace of new listings slowing, Kuppa said pricing has begun to rationalise.

This shift, he suggested, may create opportunities for investors willing to adopt a counter-cyclical approach and invest during periods when market enthusiasm declines.

Across the panel, diversification emerged as a recurring theme. Investors were advised to balance exposure across multiple asset classes rather than concentrate risk in a single market segment.

The discussion also touched on potential market scenarios depending on how the geopolitical situation evolves. In a relatively optimistic outcome where tensions ease quickly, improving corporate earnings could support a recovery in Indian equities.

In a more adverse scenario involving prolonged conflict and sustained high oil prices, economic growth could slow and markets could experience additional downside before stabilising.

For investors, the central takeaway remains that geopolitical events often create short-term volatility, but long-term equity performance tends to be shaped more by domestic economic fundamentals.