Indo-Pak tension makes Dalal Street nervous, veterans say disruption will not last long

 Dalal Street on Thursday reacted with nervousness to the Indian Army’s claim of surgical strikes at some terror bases in Pakistan. However, market veterans said the disruptions in the market due to the regional geo-political tensions would not stay for long.

"We have not had any kind of prolonged market disruptions due to regional geopolitical tensions. I would not worry too much on this negative sentiment continuing given India’s decision in what is essentially a retaliation to what happened in Uri," Tirthankar Patnaik, India Strategist, Mizuho Bank said in an interview with ETNow.

"The markets are a bit jittery but I would not look at a sustained negative sentiment based on this," Patnaik said.

The markets have had a dream run in the last couple of months and a correction right now does not worry me, says Patnaik.

“I would focus on similar historical instances, be it May 1998 or the 2001 attack on Parliament or the November 2008 attacks, when the market had seen such kneejerk response," he said.

 Dipan Mehta, Member of NSE & BSE, said this is the beginning of a phase of uncertainty for the Indian markets, if the situation were to prolong.

“For investors, a 10 per cent correction cannot be ruled out from the peak. The right strategy is to stay put right now and maybe try and add positions at lower levels. Any military situation is not taken lightly by markets, as it fuels uncertainty and impacts investor sentiment. There is no specific time period when we can say that it would all be over,” he said.

India’s response would certainly have implication on financial markets as there will be some action from Pakistan, which will fuel more uncertainty, he said.

Pakistan dismissed India's claim of a "surgical strike" as an illusion, saying that the incident was "cross-border fire". "The notion of surgical strike linked to alleged terrorists' bases is an illusion being deliberately generated by India to create false effects," the military said in a statement.
 Ajay Srivastava, CEO, Dimensions Consulting, said it was no surprise. "If you see the jingoism going on in the TV channels in India, this was a kind of forced response. It is going to affect the markets. Now that is going to unnerve both foreign investors as well as domestic investors," he said. 

"We are getting calls saying cut out our positions, let us get out of the market. I think there will be a knee-jerk reaction to some extent, and we do not know the scale of it. We do not know what Pakistan’s response is going to be but quite obviously it is a game changer as far as the market is concerned. Traders who have leverage positions in the market will be in more trouble," he said.

Chakri Lokapriya, CIO & MD, TCG AMC, said, "If we rewind back to the Kargil War on the day of the announcement in May, the market had fallen about close to 4 per cent and subsequently after about three or four trading sessions it retraced entire loss."

"While this is no Kargil and these are still early days. I would not be surprised if the market falls little bit from here which will be led by high beta stocks. Lot of it will depend upon how Pakistan reacts but I think the correction will not be more than a 3% to 5% in the short-term on both Nifty50 and the currency," he added.