Middle East Tensions Weigh on Markets; Experts Advise Limited Gold Allocation
Indian equity markets are expected to open lower on Monday, mirroring global sentiment as renewed conflict in the Middle East rattles investor confidence. The benchmark indices, Sensex and Nifty, are likely to see a gap-down opening, with analysts attributing the weakness to rising crude oil prices and safe-haven buying.
The escalation follows a series of airstrikes and retaliatory actions between Israel and Iran-backed forces, raising fears of a broader regional war. Oil prices surged over 3% in early Asian trade, stoking inflation concerns and weighing on risk assets.
Despite the near-term volatility, market veterans advise against panic selling. For growth-oriented investors with a long investment horizon and significant equity exposure, gold can serve as a portfolio diversifier. However, experts recommend limiting gold allocation to 5-10% of the total portfolio, as the precious metal typically underperforms equities over extended bull markets.
“Gold acts as a hedge during geopolitical crises, but its long-term returns lag behind equities. Investors should not over-allocate,” said a senior fund manager at a leading asset management company. He added that any sharp correction in equities could be a buying opportunity for patient investors.
The rupee is also likely to face pressure, depreciating against the US dollar due to capital outflows and higher crude import costs. Bond yields may inch up as investors demand higher risk premiums.
Market participants will closely monitor any diplomatic developments and central bank actions. The Reserve Bank of India is expected to remain vigilant on inflation, though immediate policy changes are unlikely.
In summary, while short-term pain is anticipated, long-term investors should stay the course, with a modest allocation to gold for diversification. Focus should remain on quality stocks and disciplined asset allocation.
