Markets at Risk of 10% Correction Amid Escalating Middle East Tensions: Experts Warn

Market Volatility Expected Amid Middle East Tensions

Vikas Khemani, Managing Director of Carnelian Asset Management, predicts a potential 10% decline in the markets in response to ongoing tensions in the Middle East and surging oil prices beyond $100. However, he believes that this is an ideal time for investors to deploy their funds.

Market Uncertainty

Khemani notes that the ongoing situation in the Middle East is likely to lead to temporary market fluctuations rather than lasting damage. He expects the Indian market to remain volatile and driven by headlines in the coming weeks, with one piece of news potentially causing a sharp decline or lift in the markets.

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Investment Strategy

To mitigate potential risks, Khemani recommends staggering purchases and avoiding globally-linked sectors. Instead, he suggests deploying cash in domestically-focused sectors, such as banks, pharma, and consumption.

Economic Impact

The potential impact of the Middle East conflict on India's economy is expected to be minimal, with oil remaining the key transmission channel. Supply chain disruptions and higher crude prices are potential concerns, but Khemani believes that India's solid macroeconomic fundamentals will help mitigate these effects.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

India's Economic Outlook

Carnelian Asset Management's Managing Director emphasizes India's solid economic position, citing:

• Debt-to-GDP ratio: under control
• Banking system: robust
• Inflation: under control
• Fiscal deficit: under control
• Current account deficit: under control
• Corporate funding: recovering
• Fiscal stimulus: available
• Monetary stimulus: available

Khemani highlights India's track record of delivering strong long-term returns, with a 17-18% CAGR return, making it one of the two developed markets in the world.