As tensions between Israel and Iran intensify, we all have one question on everyone's mind—
Will it affect Indian stock markets or my mutual fund investment?The short answer is: Yes, indirectly. I can put it into simple words.
???? How Global Conflict Impacts India
Even though India is not directly involved in the war, we are impacted nonetheless because:
It dominates much of the oil supply of the world
When oil prices rise, India will have to pay more in imports
It depreciates the rupee, increases inflation, and hurts business profits
All this adds to stock market volatility and can contribute to fluctuation in mutual fund returns, especially of equity funds.
???? Impact on Other Types of Mutual Funds
Different kinds of mutual funds respond differently:
Equity Funds: These funds are highly connected to the stock market. Hence, when markets fall due to global fear or a rise in the price of oil, NAVs of such funds fall too.
Debt Funds: They are highly stable, but susceptible to fluctuation if either there is a shift in interest rates or the foreign investors withdraw money.
Foreign Funds: If your fund is exposed to the global scene, that is, to Middle Eastern markets, it may directly get impacted.
????
Where are liquid funds most useful?At times like these, most astute investors put their money into liquid funds.
But what is liquid funds?
???? Liquid funds are a mutual fund that invests in very short-duration corporate and government securities (usually less than 91 days).
???? They do not yield relatively high returns but are safe and stable
???? Perfect for temporarily parking funds when markets are too volatile
Thus, whenever war or tension hits global markets, liquid cash is a "safe corner" for investors who do not wish their money to be idle or lose enormous sums.
???? What's Your Next Move as an Investor?
You don't have to panic.
But it's best to:
Check your portfolio holdings in riskier industries
Avoid jumping to conclusions
Keep some liquid funds available in case short-term volatility is anticipated Hold on to your long-term dream, but be cautious in the short term
These international wars like the Israel-Iran war may not fall directly on Indian markets, but the spillover effects like a rise in the price of oil and global fear can create volatilities. In these cases, liquid funds make you secure and nimble without taking you out of the market.
you can find more details about liquid funds on this website;
https://www.mysiponline.com/mutual-funds/liquid 