Should I Still Invest in Mutual Funds during war?

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War Is On, Markets Are Down: Should I Still Invest in Mutual Funds? (25-Year Data Analysis)

Part of our Mutual Funds India 2026 hub: Complete Guide to Mutual Funds India 2026

Your phone will not stop buzzing.

War in West Asia. US and Israeli strikes on Iran. Crude oil spiking. The Nifty is down. Your portfolio is down. Your WhatsApp group has 47 unread messages and every one of them is a doomsday prediction.

“Should I stop my SIP?”

“Should I move everything to FD?”

“Is this the beginning of something much worse?”

Take a breath. Put your phone down. And read this before you do anything.

India’s market capitalisation has fallen by approximately $447 billion in just three trading sessions following the escalation of the West Asia conflict in March 2026 — a fall comparable in absolute terms to the COVID-19 crash of March 2020.

But here is what 25 years of Indian market data says about exactly this moment: the investors who panicked and sold during every previous crisis lost money. The investors who stayed invested — or better yet, kept their SIPs running — came out ahead. Every single time.

This article shows you the data, crisis by crisis, and tells you exactly what to do right now.

$447 Billion India market cap lost — March 2026

37% Sensex GAINED during Kargil War 1999

+105% Nifty return in 12 months after COVID crash

0 Negative 5-yr rolling periods for Nifty in 35 years

1. What Is Happening Right Now

In early March 2026, following U.S. and Israeli strikes on Iran, the West Asia conflict escalated sharply. Indian markets sold off hard across three consecutive trading sessions. India’s total market capitalisation declined by approximately $447 billion to $4.7 trillion — matching in absolute terms the magnitude of the COVID-19 market crash of March 2020.

As of March 2, 2026, the Nifty 50 had fallen over 1,000 points across three sessions. The Nifty Midcap 150 and Nifty Smallcap 250 fell 2% and 2.2% respectively. Crude oil jumped on supply disruption fears. Foreign portfolio investors (FPIs) accelerated their selling.

Every headline is designed to make you act. The news cycle runs on urgency and fear. But before you make any financial decision based on today’s headlines, you need to understand what today looks like from the perspective of the last 25 years.

2. The Question Everyone Is Asking — And What Data Says

The question in your head right now is some version of: should I stop investing, move to safety, and wait for this to blow over?

It is a completely rational question. The fear is real. The market pain is real.

But here is the problem with that plan: by the time “this has blown over” is visible in the headlines, the recovery has already happened. The investors who wait for certainty before investing always buy back in at higher prices than the ones who stayed through the uncertainty.

As John Templeton — one of the greatest investors of the 20th century — said: “The time of maximum pessimism is the best time to buy.”

India’s 25-year market history proves this statement not as philosophy, but as mathematics. Let us look at the numbers.

3. 25 Years of Crises — Every Single One, With Numbers

Indian markets have faced 8 major crises between 1999 and 2026 — wars, terrorist attacks, financial collapses, pandemics, and geopolitical shocks. In every single case, the Nifty 50 or Sensex recovered to above pre-crisis levels. In most cases, 12-month returns from the point of peak fear were strongly positive.

Crisis	Period	Peak Market Fall	1-Month Return	12-Month Return	Recovery Timeline
Kargil War	May to Jul 1999	-12.5% brief dip	+16.5%	+29.4%	Before war ended
Parliament Attack	Dec 2001	Sharp fall	Mixed	-1.3% (tech bust overlay)	12 to 18 months
26/11 Mumbai Attacks	Nov 2008	Sharp fall	+3.8%	Strong recovery	Under 12 months
Global Financial Crisis	2008 to 2009	Nifty -60%	Negative	Recovery began 2009	18 to 24 months
URI Attacks	Sep 2016	Sharp fall	-7.3%	+15.6%	6 months
Pulwama Attack	Feb 2019	-3 to 4% dip	+3.8%	+12.7%	Under 2 weeks
COVID-19 Crash	Mar 2020	Nifty -40% in 46 days	Negative at bottom	+105% in 12 months	Under 6 months
Russia-Ukraine War	Feb 2022	-4.78% Day 1	Recovered in weeks	Recovered in 6 months	Under 6 months
West Asia — Current	Mar 2026	-$447Bn market cap	Unknown	History says: positive	To be determined

The only true outlier in 25 years is 2001 — and even then, the -1.3% was almost entirely because a global technology recession was already underway before the Parliament attack. Remove that macro overlay, and every crisis in this list delivered positive 12-month returns from the point of maximum fear.

4. The Kargil War 1999 — Markets Went UP During the War

The Kargil War is the most important historical example for every Indian investor facing the current West Asia situation. It was a real, armed conflict between two nuclear-armed nations. The fear at the time was existential. And yet:

The Sensex rose from 3,378 to 4,687 by the time the war ended on July 26, 1999 — a gain of 37% during the conflict itself. There was a brief correction between May 20 and May 28 where the Sensex fell 12.5%. Investors who sold during that correction locked in losses. Investors who held — or who kept investing — ended the war period with 37% gains.

In the 12 months following the Kargil War, the Nifty 50 delivered +29.4% returns.

Why did markets rise during a war? Because markets do not price fear — they price economic fundamentals. The Indian economy in 1999 was growing strongly. Corporate earnings were intact. The war, while terrifying, did not change those underlying realities. Markets saw through the noise and focused on the signal.

The parallel with 2026 is clear. India’s GDP is growing at 6.5 to 6.9%. Corporate earnings are strong. The West Asia conflict, while serious, does not directly impair India’s economic fundamentals. Markets may price in fear short-term. History says they correct that mispricing within months.

5. The 2008 Global Financial Crisis — Worst Crash, Best Lesson

The 2008 crash was not a geopolitical event. It was a structural collapse of the global financial system. Lehman Brothers failed. Major banks worldwide needed bailouts. The Nifty 50 fell approximately 60% from its peak. This was genuinely the worst financial event since the Great Depression.

And yet, the lesson for SIP investors is unambiguous.

Investor Type	What They Did in Oct-Nov 2008	Result by 2013 (5 years)	Result by 2018 (10 years)
Continued SIP every month	Kept investing. Bought units at 60% discount.	Strong positive returns	~12% XIRR (approx)
Stopped SIP in panic	Stopped investing. Sat in FD or cash.	Significantly lower	Much lower — missed the cheap units
Sold everything and moved to FD	Locked in 60% loss permanently.	FD at 7% from a -60% base	Never recovered the lost ground

The investors who stopped SIPs in October 2008 missed the most important thing that SIP does in a crash: it buys more units at a lower price. Those cheap units — purchased at 2008 prices — were the primary engine of excellent 10-year returns. The investors who stopped buying those cheap units never recovered the opportunity.

6. The COVID-19 Crash 2020 — Fell 40%, Recovered 105% in 12 Months

Q: Q4: Should I move my mutual fund money to FD because of the market fall?

No -- unless the money was already earmarked for a short-term goal. Moving equity fund money to FD during a market fall permanently locks in a temporary loss. You exit at the bottom, earn 6.5% FD returns from that lower base, and typically buy back into equity at higher prices later. Every investor who did this in 2008 or 2020 regretted it significantly. Long-term money belongs in long-term assets -- regardless of short-term news.

The COVID-19 crash is the most directly comparable event to what is happening right now in March 2026. Not just in the scale of the market fall, but in the nature of the fear.

In March 2020, the Nifty 50 fell 40% in 46 trading days. Economies worldwide were shutting down. The fear was not just about markets — it was about whether civilisation as we knew it would continue functioning. That fear was larger, more primal, and more widespread than anything the markets have seen before or since.

What happened next: the Nifty 50 recovered its pre-COVID levels within 6 months and went on to deliver approximately 105% return from the March 2020 bottom over the following 12 months.

The Four Types of Investors in March 2020 — and Their Outcomes

Investor	Action in March 2020	Portfolio by March 2021
SIP investor who continued	Kept Rs 5,000/month SIP through March, April, May, June 2020.	Units bought at 35 to 40% discount ALL doubled within 12 months. Portfolio strongly ahead.
SIP investor who paused for 3 months	Stopped SIP. Restarted in July 2020.	Missed the cheapest 4 months. Noticeably lower returns than those who continued.
Investor who sold in March 2020	Redeemed all units at -40%. Moved to FD.	Locked in permanent 40% loss. FD at 6.5% from a -40% base. Never recovered.
New investor who started SIP in April 2020	Started fresh SIP at the bottom of the crash.	Outstanding 2-year returns from those cheap units.

7. The SIP Investor vs the Panic Seller — Side by Side

Let us make this concrete for March 2026 specifically. Same fund, same starting amount — different responses to this week’s market fall.

	Investor A: Continues SIP	Investor B: Stops SIP and Moves to FD
March 2026 — during fall	Continues Rs 5,000 SIP as scheduled. Market is down 8 to 10%.	Stops SIP. Redeems existing units at -8 to 10%. Moves to FD at 6.5%.
April to June 2026 — early recovery	SIP buys units at 10 to 15% discount vs January highs.	In FD. Earns 6.5%. Watches markets recover without participating.
September 2026 — assuming 25% recovery	March SIP units up 15 to 25%. Continuing SIPs also performing.	FD earns 3.25% for 6 months. Portfolio still behind January levels.
March 2028 — 2 years later	Long-term SIP compound growth continues. Wealth building uninterrupted.	Likely reinvests in MF at higher prices than March 2026. Permanently poorer.
The structural reality	Rupee Cost Averaging: bought cheap units in March 2026. Those generate the next cycle of returns.	Paid 8 to 10% loss to exit. Gave up cheap units. Paid tax. Paid re-entry at higher price.

Note: Illustrative only. Based on pattern consistent with all previous crises in 25-year data. Actual market recovery will differ.

The structural logic is the same in every single row: the investor who stayed bought cheap. The investor who left paid a permanent toll. This has been true in 1999, 2001, 2008, 2016, 2019, 2020, 2022, and it will be true in 2026.

8. What You Should Do Right Now — Your Action Guide

Enough history. Here is exactly what to do based on your specific situation today.

Your Situation	What to Do	What NOT to Do
You have an ongoing equity SIP	Continue without any change. Every unit bought right now is at a discount.	Do not stop, pause or reduce. This is the worst possible time to stop a SIP.
You have a lump sum invested in equity funds	Hold. Do not redeem. Let time and compounding do their work.	Do not sell in panic. Redemption locks in a temporary loss permanently.
You have idle cash or a bonus to deploy	Excellent entry point. Start a new SIP or use STP (Systematic Transfer Plan) over 3 to 6 months.	Do not try to time the exact bottom. Nobody does it successfully.
You need this money within 2 years	Move this specific amount to a liquid fund or short duration debt fund immediately.	This money should never have been in equity. Move it regardless of market conditions.
You are retired and on SWP	A Balanced Advantage Fund auto-reduces equity in falling markets. Stay the course.	Do not move your entire retirement corpus to FD in panic. That locks in the loss.
You are thinking of starting to invest	This is exactly the right time to start a SIP. Markets on sale vs 3 months ago.	Do not wait for a more comfortable-feeling market. Comfort comes at higher prices.

As Navia Capital wrote in their March 2026 investor update on exactly this situation: “If you are investing through SIPs or building a retirement portfolio, do not let the fear of war derail your strategy. Stay consistent. Stay logical. And stay invested. When things settle, you will be glad you stayed the course.” ^[5]

9. Frequently Asked Questions

Q1: Should I stop my SIP because of the war and market fall?

No. Stopping your SIP during a market fall is historically the most costly decision a long-term investor can make. When markets fall, your SIP automatically buys more units at a lower price — this is Rupee Cost Averaging turning the market fall into your advantage. Data from every major Indian market crisis — Kargil 1999, the 2008 crash, COVID 2020 — shows that investors who continued SIPs through the crisis always outperformed those who stopped.

Q2: Is it safe to keep money in mutual funds when war is on?

For money you do not need within the next 2 to 3 years, yes. India’s market has recovered from every geopolitical shock in 25 years — including a 37% Sensex gain during the Kargil War itself. For money you need within 2 years, it should be in a liquid fund or FD regardless of market conditions. The war does not change the long-term investment case — it creates a temporary discount on the same underlying businesses.

Q3: What happened to Indian markets during previous wars and crises?

In 8 major crises over 25 years, Indian markets recovered every time. Highlights: Kargil War 1999 — Sensex +37% during the conflict, +29.4% over 12 months. COVID-19 crash March 2020 — Nifty fell 40% then delivered +105% in 12 months. Pulwama attack 2019 — market recovered within 2 weeks, +12.7% over 12 months. The only partial exception was 2001, where a concurrent global tech bust added to the impact.

Q4: Should I move my mutual fund money to FD because of the market fall?

No — unless the money was already earmarked for a short-term goal. Moving equity fund money to FD during a market fall permanently locks in a temporary loss. You exit at the bottom, earn 6.5% FD returns from that lower base, and typically buy back into equity at higher prices later. Every investor who did this in 2008 or 2020 regretted it significantly. Long-term money belongs in long-term assets — regardless of short-term news.

Q5: Is this a good time to start investing in mutual funds?

A market that has fallen 8 to 15% from its recent high is, by definition, offering the same underlying companies at cheaper prices. For a long-term SIP investor with a 5-year or longer horizon, starting during a market correction has historically produced stronger 5-year returns than starting at a market peak. This is not a guarantee — all investments carry risk. But 25 years of Indian market data strongly support the case for investing through, not around, periods of geopolitical uncertainty.

Conclusion

The data has given the same answer 8 times across 25 years.

War breaks out. Markets fall. Fear peaks. Everyone’s phone is buzzing with predictions of permanent collapse. And then — every single time — the Indian economy demonstrates that it is larger, more resilient, and more fundamentally sound than any single geopolitical event.

The Nifty 50 has never delivered a negative return over any 5-year rolling period in 35 years of history. The current West Asia conflict and the $447 billion fall in India’s market cap is frightening. It is also, from the perspective of history, another buying opportunity dressed up as a crisis.

Your SIP does not read the news. It does not react to WhatsApp forwards. It does not know that war is on. It simply buys units at whatever price the market offers this month — and this month, that price is lower than it was three months ago.

Stay invested. Continue your SIP. Do not let fear make your financial decisions. Twenty-five years of data is on your side.

Continue reading: This article is part of our Mutual Funds India 2026 content hub at aspirixwriters.com/mutual-funds/

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Author

CA Ajay Khandelwal is a Chartered Accountant and financial expert with over 21 years of experience in taxation, compliance, and business advisory. As a key expert at AspirixWriters, he provides practical insights on income tax, financial planning, and regulatory matters, helping readers make informed financial decisions.

Author profile CA. Ajay Khandelwal

Disclaimer

This article is for educational and informational purposes only. It does not constitute personal financial advice or a recommendation to buy, sell, or continue any specific mutual fund investment.

Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing. Past performance does not guarantee future results. Historical crisis data is accurate to the best of our knowledge based on cited sources — verify independently before making decisions. The comparison of current events to historical crises is for illustrative purposes. Future outcomes may differ materially from historical patterns. Please consult a SEBI-registered Investment Advisor before making investment decisions based on current market conditions.

Find a SEBI-registered investment advisor at: sebi.gov.in

References

Every data point can be independently verified at the source link below.

[1] Wright Research — Market Impact on India-Pak War: Kargil, Uri, Sindoor | +16.5% 1-month Kargil | +29.4% 1-year | Pulwama +12.7% | URI +15.6% | Full 25-year data — https://www.wrightresearch.in/blog/impact-on-markets-from-india-and-pakistan-conflicts-and-war-kargil-uri-operation-sindoor-and-more/

[2] Business Standard — War-driven selloff erodes $447 billion off India market cap, close to COVID crash | March 15, 2026 — https://www.business-standard.com/markets/news/war-driven-selloff-erodes-447-bn-off-india-mcap-close-to-covid-crash-126031500507_1.html

[3] Zee Business — Kargil War and Stock Market Recovery: Sensex bounced back 37% defying 1999 conflict | Tata Motors +92% during war | May 2025 — https://www.zeebiz.com/market-news/news-kargil-war-and-stock-market-recovery-when-sensex-bounced-back-37-defying-1999-conflict-impact-indo-pak-tensions-359693

[4] NSE India — Historical Nifty 50 Index Data 1990 to 2026 | Zero negative 5-year rolling periods | COVID crash and recovery data | 35-year track record — https://nseindia.com/products-services/indices-nifty50-index

[5] Navia Capital — Understanding Market Movements During Periods of Uncertainty | John Templeton quote | March 2026 investor update | Nifty fell 1,000 points in 3 sessions — https://navia.co.in/blog/understanding-market-movements-during-periods-of-uncertainity/

[6] IndiaBonds — Effect of War on the Economy: A Guide for Indian Investors | Pulwama dip and recovery | Sector impact analysis | Investor guidance — https://www.indiabonds.com/kuchbhi/effect-of-war-on-economy-guide-for-indian-investors/

[7] AdvisorKhoj — SIP Return Analysis Through 2008 and 2020 Market Crises | Rupee Cost Averaging data | Investors who stopped vs continued SIP outcomes — https://advisorkhoj.com/mutual-funds-research/SIP-Returns-Calculator

[8] Value Research — Fund performance database | SIP return analysis through crisis periods | 2008 and 2020 detailed comparison — https://www.valueresearchonline.com/funds/best-mutual-funds/

[9] Arthgyaan — Best and Worst Performing Mutual Funds 5 Years After the COVID-19 Crash | March 22, 2025 | Long-term SIP outcome data — https://arthgyaan.com/blog/best-and-worst-performing-mutual-funds-5-years-after-the-covid-19-crash.html

[10] AMFI India — Investor Education | Stay invested guidance | Mutual Fund Sahi Hai campaign | amfiindia.com — https://amfiindia.com/investor/knowledge-center-info