Explained: Why Dalal Street hasn't panicked amid ongoing Iran–Israel conflict

The Iran–Israel conflict rattled global markets last week, briefly dragging down Indian equities. But the panic was short-lived. On Monday, the Nifty and Sensex rebounded sharply, reflecting the Street's growing comfort with geopolitical uncertainty, and its continued focus on domestic fundamentals.While markets did slip in the immediate aftermath of the conflict, investors quickly shifted back to buying, taking cues from stabilising oil prices and strong domestic flows.advertisement"Despite the escalation of the Iran–Israel conflict, globally stock markets are steady and resilient," said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. "The decline in the US volatility index CBOE suggests that markets are unlikely to correct sharply unless the conflict takes a dramatic turn for the worse."
The early days of the flare-up did trigger a risk-off mood as oil prices spiked and equities slid. But with no disruption to energy supplies or trade flows through critical chokepoints like the Strait of Hormuz, those fears quickly eased.'Global markets often behave contrary to mainstream expectations, and the recent escalation between Israel and Iran is a textbook example,' said Harshal Dasani, Business Head at INVasset PMS. 'While the initial reaction was a spike in oil prices and a flight to safety, the absence of direct supply disruptions... quickly settled nerves.'advertisement'As clarity emerged and worst-case scenarios were ruled out, markets bounced back,' he added. 'Investors are again viewing dips as opportunities, with capital rotating into domestic themes that are largely insulated from global geopolitical shocks.'RETAIL INVESTORS BUY THE DIPBack home, domestic liquidity once again cushioned the fall. Over four sessions of FII selling worth Rs 8,080 crore, DIIs stepped in with a far stronger Rs 19,800 crore in net buying, fuelled by steady retail flows.'The main contributor to the market resilience is the retail investors using every dip in the market as a buying opportunity,' said Vijayakumar. 'Valuations do not appear to deter retail investors. Sustained retail funds flows, mainly through SIPs, are empowering the DIIs to buy consistently.'Even as war headlines dominated, Indian markets stayed grounded in local drivers. 'We're seeing renewed strength in internal consumption-driven sectors—especially energy, power, defence, and capital expenditure-linked plays,' Dasani said. These themes, he added, 'benefit from long-term policy support, strong demand visibility, and minimal dependence on external macro conditions.'Vinod Nair, Head of Research at Geojit, said large-cap stocks led Monday's recovery. 'Despite ongoing geopolitical tensions between Israel and Iran, the market moved higher, supported by gains in large-cap stocks, as investors maintained their focus on long-term fundamentals,' he said. However, he flagged that small-cap stocks may underperform in the near term due to high valuations and lack of short-term triggers.advertisementOil and gas stocks were among the biggest gainers, thanks to crude stabilisation. IT stocks also rallied, ahead of the US Fed's rate guidance this week.CAUTION REMAINSWhile markets may have shrugged off the worst-case scenarios, the risk hasn't entirely vanished. As Dasani pointed out, 'Every fresh negative headline may cause temporary jitters, but the broader trend remains bullish. As long as geopolitical risks remain contained and don't evolve into systemic shocks, markets will continue to absorb such events.'Vijayakumar also offered a word of caution: 'Even while exercising some caution, it makes sense to remain invested in this market and to buy the dips.' With the Nifty finding support around 24,500 and facing resistance near 25,000, traders and investors alike are watching the next global trigger but staying the course.(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)Must Watch

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