Recent analysis by AllianceBernstein examining eight major conflicts over the past five decades reveals that equity markets have often proved more resilient than the initial shock of war might imply. The research shows that while the S&P 500 was often volatile around the outbreak of hostilities, it typically stabilised over time. On average, the S&P 500 returned an average of 0.9% one week after hostilities began, 2% after one month, 3.8% after one quarter, and 7% over the following year. This historical pattern suggests that while war can cause sharp market disruption, the investment consequences are rarely uniform or lasting.
The latest market moves highlight how quickly leadership can rotate during geopolitical tensions, with the MSCI World Index down as much as 7% since the conflict began. According to The New Zealand Herald, the smaller-cap Russell 2000 index in the US has been down as much as 10% since the conflict began, with earlier rotations towards "old economy" and small-cap stocks unwinding. Europe's STOXX 600, Hang Seng and Nikkei indices in Asia have experienced roughly double the declines compared to the US markets. However, the S&P 500 in the US and New Zealand's NZX have held up better, with the US benefiting from its relative energy independence as a net exporter of oil and deep capital markets.
The current environment demonstrates the critical importance of active versus passive investment strategies during volatile periods. As reported by The New Zealand Herald, passive investing follows market composition by design, allocating capital based on index weights, meaning investors are effectively "driving using the rear-view mirror" and remain exposed to whatever parts of the market had previously been performing. Active managers can respond by adjusting positioning as leadership rotates and reallocating capital towards areas showing greater resilience. This flexibility becomes particularly valuable during periods of disruption when leadership within markets can shift quickly, allowing active managers to identify emerging opportunities while passive strategies tend to reduce exposure as prices fall.
According to Mint, Grover expects that while the US is relatively less dependent on energy imports compared to India, global energy prices still influence inflation across both economies. Higher energy costs could push inflation up and disrupt interest rate cycles, potentially delaying rate cuts. Even if conflicts end quickly, restoring energy infrastructure takes time, which could prolong supply disruptions and lead to short- to medium-term volatility. However, Indian companies could benefit from opportunities in infrastructure rebuilding. The latest market developments show that volatility creates both risks and opportunities, with active managers able to buy high-quality companies at more attractive prices during market sell-offs.
According to the Mint interview, Grover is currently seeing attractive opportunities in undervalued small- and mid-cap stocks, particularly in sectors like defence, real estate, and speciality chemicals. Real estate is benefiting from strong urban demand and infrastructure momentum. For long-term investors, staggered investments through diversified equity funds remain a prudent way to navigate volatility, as the fund house executive emphasized that the fundamentals of investing remain unchanged regardless of geopolitical events. The current environment reinforces that active investing allows for a more nuanced response - identifying not just where risks lie, but where opportunities are emerging, while passive strategies tend to reduce exposure during market dislocations.
As reported by Mint, the merger between Bank of Baroda and BNP Paribas Asset Management creates a combination that allows the fund house to serve investors across India more effectively. The fund house currently has over 28,000 MFDs onboarded and maintains a robust infrastructure to support all distribution channels. AUM sourced from Bank of Baroda stands at approximately ₹13,000 crore, which is under 30% of total AUM, highlighting strong diversification beyond the bank channel.
According to Mint reports, Grover emphasized that investors should continue their investment plans irrespective of market conditions, as the fundamentals of investing remain unchanged. For those with surplus capital and higher risk appetite, volatility can present attractive staggered investment opportunities. The fund house currently offers an outbound US Small Cap Fund structured as a Category III AIF with a minimum investment of $150,000, primarily for non-retail resident Indian investors seeking global diversification. Dimensional Fund Advisors cautions investors against making asset allocation changes in response to geopolitical events, arguing that market shocks are a test of discipline rather than a cue to react.
