Explainer: War Impact Decoded – How Sensex and Nifty behaved during global conflicts

Amid a sharp fall in equity markets due to ongoing geopolitical tensions, investors are increasingly asking whether the Nifty 50 has entered an oversold zone and whether this is the right time to invest.

Market expert Anil Singhvi said historical data and multiple research indicators suggest that markets may be close to forming a bottom, though risks remain.

Speaking in a special show, Singhvi said market declines during war-like situations are not new and have been seen in the past as well. “Markets fall during war, and they recover once the uncertainty reduces. What is difficult to predict is how long the war will last and at what level the recovery will begin,” he said.

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He said the analysis was based on four different research parameters, including time cycles, long-term trends, technical indicators, and historical market behaviour during wars, to provide a broader perspective to investors.

Time-based trend indicates Jan–Apr bottom formation

According to Singhvi, a study of the past 10 years shows that in 9 out of 10 years, the market has formed its yearly bottom between January and April. “Four times the bottom was formed in January, three times in March, once in February and once in April. Only one exception was seen in June 2022,” he said.

He added that the period from September to December has historically seen market tops. “In 9 out of 10 years, the top was formed between September and December, with December alone accounting for six instances,” he said.

Based on this trend, Singhvi said the current period could be favourable for investment. “If markets are near their lower levels between January and April, the risk of investing reduces,” he said.

Nifty down 13% from peak, historical upside strong

The Nifty 50 has declined around 13 per cent, or over 3,400 points, from its peak of 26,373 to around 22,955 levels as of March 16.

Singhvi said historical data show that from the yearly bottom to the top, markets have delivered strong returns. “Excluding 2020, the average return from bottom to top is around 23 per cent. The range has been between 16 per cent and 37 per cent,” he said.

He noted that 2020 was an exceptional year due to the COVID-19 pandemic and has been excluded from the analysis.

17-month consolidation cycle followed by gains

Singhvi also highlighted a long-term trend observed over 26 years. He said that in many instances, markets have gone through a 17-month phase of negligible returns.

“In such 17-month periods, returns have remained between +1 per cent and -2.5 per cent. However, the performance after this phase has been strong,” he said.

According to the data, in all such cases, the market delivered positive returns in the next 12 months. “Only two instances saw single-digit returns, while in 11 cases returns ranged between 12 per cent and 81 per cent,” he said.

Over three years, returns were also consistently positive. “In most cases, returns ranged between 39 per cent and 248 per cent, with an average of around 75 per cent,” Singhvi added.

He said the current market has completed a similar 17-month phase from September 2024 to February 2026. “This suggests a high probability of positive returns over the next 12 to 36 months,” he said.

Technical indicators signal oversold conditions

On technical parameters, Singhvi said the Relative Strength Index (RSI) indicates that the market has entered an oversold zone.

“Since 2022, there have been seven instances when RSI fell below 30. In six of those cases, the market saw a strong recovery,” he said.

He added that typically, when RSI falls between 26 and 30, markets are considered oversold. “Recently, RSI dropped to 28 on March 9 and further to 24 by March 13, indicating deeper oversold conditions,” he said.

According to past trends, recoveries after such signals have come within two weeks to two months. “The gains have ranged between 5 per cent and 18 per cent,” Singhvi said, while noting that there was one exception in October 2024.

War impact: recovery seen after 6–12 months

Singhvi also analysed market behaviour during major geopolitical events, including conflicts involving Russia-Ukraine, Israel-Hamas, and the US-Iraq war.

He said that in all major cases studied, markets recovered after initial declines. “In all four major war events analysed, markets delivered positive returns within 6 to 12 months,” he said.

Returns in six months ranged from 8 per cent to 30 per cent, while 12-month returns ranged between 7.5 per cent and 68 per cent, he added.

Risks remain despite positive indicators

Despite favourable data, Singhvi cautioned that risks remain. He said continued selling by foreign institutional investors (FIIs) is a key concern. “As long as FII selling continues, strong upside may remain limited,” he said.

He also flagged risks such as prolonged war, a spike in crude oil prices above USD 120 per barrel, global market weakness, and liquidity constraints in March due to financial year-end adjustments.

“There is also a possibility that markets may consolidate for a longer period instead of showing a sharp recovery,” he added.

Investment strategy: staggered approach suggested

On investment strategy, Singhvi advised investors to avoid trying to time the exact bottom. “Investors can either wait for clear signs of bottom formation or adopt a staggered approach,” he said.

He suggested two methods — time-based and level-based investing. “One can invest gradually over six weeks or six months. Alternatively, investments can be made at every 500-point or 1,000-point fall in the Nifty 50,” he said.

For those seeking lower risk, he recommended waiting for clarity on geopolitical developments before investing.