Markets and war: Will Sharp recovery follow a steep fall?

Published On: Monday, February 28, 2022 | By:

Markets and war: Will Sharp recovery follow a steep fall?

For the global equity markets, it was a very tough time over the past few weeks as they have battled several headwinds, including the recent geopolitical conflict between Russia and Ukraine that has also triggered a sharp rise in commodity prices. Market experts say the market fall was a knee-jerk reaction to the Russia – Ukraine conflict and are likely to witness a choppy phase before discounting this development and staging a sharp rebound. Over time, equity markets have generally overreacted near the geopolitical risks.

The Iran invasion of Kuwait in 1990 triggered a sharp correction in the markets and oil prices doubled. Equities markets, however, were back to peak level four months later. Closer home, the Kargil confrontation between India and Pakistan also saw a sharp correction in the markets in mid-1999. However, markets rallied sharply as realization dwelled that this would be a short-lasting conflict.

This time around, however, there are multiple moving parts that investors need to track, like the outcome of the state elections, IPO of LIC that may impact the available liquidity and the possible rate hikes by global central banks, especially the US Federal Reserve (US Fed). Yet, analysts are hopeful that the markets will recover lost ground and trend higher once more clarity on how these events are progressing.

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