How to pick the right funds amid the Israel war's
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  • Tata Multicap Fund - Regular Plan - Growth
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Oct 10, 2023 5 min read

Impact of Israel - Hamas Conflict on Indian Stock Market 2023

Impact of the Israel war on the Indian stock market

Introduction

We talk about the situation - The recent Hamas missile attack on Israel, causing over 500 casualties, is among the deadliest in 50 years. While the conflict is longstanding, such a scale of devastation is rare. The ongoing Israel-Hamas conflict and other geopolitical tensions have immediate and potential long-term economic repercussions.

India and Israel have cultivated strong trade and economic ties since they established diplomatic relations in 1992. Their bilateral trade has thrived, reaching a substantial $10.1 billion during the fiscal year 2022–23, solidifying India's position as Israel's second-largest trading partner in Asia.

Here's an overview of their bilateral trade:

  • In the fiscal year 2022-2023, India exported goods worth $7.89 billion to Israel, while imports were worth $2.13 billion.
  • India's major exports to Israel include diesel, valued at $5.5 billion, and cut or polished diamonds, amounting to $1.2 billion.
  • Meanwhile, India's imports from Israel consist of rough diamonds worth $519 million, parts of photovoltaic cells valued at $411 million, and potassium chloride at $105 million.

It's worth noting that the trade relationship between India and Israel is robust, with significant economic activity in various sectors. However, given the nature of their trade, particularly in electronic equipment and items with semiconductors, it's possible that developments in these areas could have a notable impact on their trade dynamics and economic relations.

Impact on the Indian market

When oil prices increase, it can have a significant impact on inflation. This relationship is primarily because oil is a crucial input in the production of many goods and services. As oil prices rise, businesses often face higher costs for transportation, manufacturing, and energy, which can lead them to pass those increased costs to consumers in the form of higher prices for products and services. This is the best time to invest in dynamic asset allocation mutual fund category through online SIP.

Equity may be highly impacted due to sentimental impacts

Investors often make decisions based on emotions like fear and greed. When there's a geopolitical event or any other factor causing uncertainty, emotions can run high. This can lead to impulsive buying or selling decisions in the equity markets, causing rapid and sometimes irrational price movements. sentimental impacts can lead to significant short-term fluctuations and heightened volatility in equity markets.

Expert views

Experts anticipate that this shortfall in equity will be sustained for a shorter period, they are essentially suggesting that they expect the market correction or downturn to be temporary and relatively brief. if the stock market goes down for a little while, it's probably just a small hiccup in a bigger trend where things are getting better overall. So, they expect the market to bounce back fairly quickly.

Foreign Institutional Investors

Foreign Institutional Investors (FIIs) might withdraw money from the Indian market and move it into safer assets like bonds and gold, they are considering how global events or market conditions could influence investment decisions.

During times of uncertainty, such as geopolitical conflicts or economic turbulence, investors, including FIIs, tend to become more risk-averse. They seek safety and stability for their investments to protect their capital.

Bonds and gold are considered safe-haven assets because they have a track record of holding or increasing in value during times of market stress. Bonds offer regular interest payments and are generally seen as less risky than equity shares. Gold, on the other hand, is often viewed as a store of value in times of economic and geopolitical instability, and in tough times individuals tend to park their money in physical assets.

It's important to note that this shift in investment behavior doesn't necessarily reflect a lack of confidence in the Indian market's long-term potential.

Impact on India-Middle East-Europe Economic Corridor

IMEC is an important infrastructure project aimed at building better infrastructure and trade relationships so that businesses can work together more easily and people can access more opportunities for jobs and trade across these regions. Any delays or disruptions in such a project can indeed have far-reaching repercussions across various sectors, like- Infrastructure, logistics, and transport.

The impact extends beyond India's borders, affecting regional energy cooperation and stability. To mitigate these risks, businesses and governments need to diversify their supply chains and explore contingency plans to ensure a steady flow of critical components like photovoltaic cells.

Since, India imports photovoltaic cells from Israel, which help in making electric goods and semiconductors this will have an impact on the decrease in the supply of electronic goods and solar panels which will lead to an increase in their prices.

Best mutual fund to invest in –

In this current scenario, the market fluctuates constantly, so it is difficult to manage investment across different asset classes. To cater this problem of situation, our mysiponline professional team recommend the following mutual fund categories and their best-performing fund -

Dynamic Asset Allocation Fund

  • HDFC Balanced Advantage Fund
  • ICICI Balanced Advantage Fund
  • Baroda BNP Paribas Balanced Advantage Fund

Multi Asset Allocation Fund

  • ICICI Multi Asset Allocation
  • SBI Multi Asset Allocation
  • Tata Multi Asset Allocation

Read More : Is Baroda BNP Paribas Balance Advantage Fund 2023 Right for You?

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