Stock markets like stability and predictability. Yet, over the last few years, the geopolitical climate has been quite turbulent — from the Ukraine-Russia war, Middle East conflict, India-Pakistan tensions and the trade policies of US President Donald Trump — keeping investors on the edge.
The war in Ukraine has now entered its fourth year, while the conflicts in the Middle East have created major havoc for oil-importing countries like India. Now, the tensions between China and Taiwan are flaring up, and all these events are having major impacts on the markets.
Even though the stock markets in India have mainly remained resilient and delivered strong returns to investors amid domestic stability and steady earnings, their trajectory has been littered by sharp gyrations.
As geopolitical risks become the new normal, investors must consider them and factor them in while constructing their investment portfolios. Commodities are particularly susceptible to these events and see sharp swings and high volatility.
“When we see these geopolitical flare-ups, we see investors flock to safe-haven assets such as gold, US treasuries and currencies such as JPY and CHF. Commodities see sharp swings like crude oil, gas, copper and food commodities over supply chain disruptions. This has caused a major realignment in supply chains, global relationships and policy shifts, meaning politics, security, and market sentiment are deeply intertwined,” said Ross Maxwell, Global Strategy Lead at VT Markets.
These disruptions also increasingly influence global capital flows, inflation expectations, and monetary policy responses.
Against this backdrop, analysts advise that building a portfolio that is less susceptible to such shocks requires a disciplined and diversified approach.
1. Focus inwards and not outwards
Despite global volatility, India’s macroeconomic stability, robust fiscal stance, and policy tailwinds (like tax cuts, rate easing, and infrastructure-led capex) create a favourable setting for domestic cyclicals and consumption-led themes, said Anil Rego- Founder and Fund Manager at Right Horizons PMS.
He believes that sectors such as financials, consumer discretionary, cement, and select industrials offer insulation from global supply disruptions and benefit from local demand revival and formalisation.
Anchal Kansal- Senior Research Analyst at Green Portfolio PMS also said that a good idea amid such an environment is to stick with companies that focus on the local market, like those involved in domestic manufacturing, local consumption, or defence, instead of those that depend a lot on international supply chains.
2. Financials hold key
Analysts also believe that focusing on companies with strong balance sheets and profitability makes sense as they can better withstand external shocks.
“When there are lots of global problems like wars and trade disputes, it’s smart for investors to build a portfolio that can handle the ups and downs. Focus on picking companies that look reasonably priced, have steady and positive cash flows, and make sure you have a financial cushion in case things go south,” Kansal added.
The earnings trajectory of India Inc, particularly in the mid- and small-cap space, remains strong, with PAT growth in 1QFY26 expected at over 12% YoY.
Rego said companies with strong balance sheets, margin resilience, and pricing power can better withstand external shocks.
Kansal also recommended staying put with large-cap stocks amid the current geopolitical climate as large-cap companies are generally more stable and have strong track records when it comes to handling tough economic or political situations. They usually have better access to resources, more reliable cash flows, and the ability to adapt when things get unpredictable.
3. Add golds, bonds to portfolio
The role of gold as a hedge in times of elevated volatility and geopolitical stress makes it an attractive bet, according to experts. In the current year alone, amid the rising Trump tariff threats and economic slowdown fears, gold prices have surged 25% so far. Even global central banks are hoarding gold as global volatility heightens.
Simultaneously, front-loaded rate cuts by the RBI and improved banking liquidity argue for exposure to medium-duration and high-quality corporate bonds as defensive income plays, according to Rego.
4. Think long term
Analysts said to try to invest with a two-to-five-year perspective, since the market can be bumpy in the short run, especially in these uncertain times.
“Don’t worry about predicting world events or economic trends, just keep a close eye on how your companies are doing, especially their profit margins (aim for those with healthy margins),” Kansal advised.
In essence, portfolios anchored in India’s domestic growth themes, backed by quality stock selection, enhanced by asset class diversification, and mindful of valuations, are best positioned to navigate the geopolitical crosscurrents of 2025 and beyond.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
