India Theme Strong for Foreign Investors, Says Samir Arora; War Risk Just a 1% Tail Event

Limited War Probability, Predictable Market Reaction

Samir Arora, founder of Helios Capital, believes that while geopolitical concerns between India and Pakistan are indeed serious, the actual probability of a full-scale war remains extremely low—just around 1%. Speaking amid escalating tensions and cross-border hostilities, Arora dismissed the notion that investors can position for such a “tail event,” emphasizing instead the rational market behavior that has followed recent developments. According to him, the modest decline observed in Indian equities, as indicated by Gift Nifty, is a reflection of temporary caution rather than systemic panic.

Highlights:

• Arora estimates the probability of full-scale war at merely 1%, classifying it as a tail risk.

• Market reaction has been modest and rational, with no signs of widespread panic.

• Arora believes the situation is likely to de-escalate, reinforcing India’s structural investment appeal.

Rebound Expected if Tensions Ease

Despite geopolitical noise, Arora is confident that markets will rebound sharply once tensions subside. Drawing from historical precedent, he suggests that 80% of market losses incurred due to temporary crises tend to be recovered swiftly once the situation stabilizes. Arora underscored that the current conflict remains within manageable limits, involving limited military engagement and controlled messaging from both governments. He added that for any lasting calm, both India and Pakistan must feel they have achieved symbolic “victory.”

Highlights:

• Any further decline in equities is expected to reverse quickly once tensions ease.

• India’s measured military and diplomatic stance signals a desire to avoid escalation.

• The psychological resolution, where both sides claim success, is key to de-escalation.

Foreign Buying Signals Confidence in India

Arora highlighted that, despite Wednesday’s flare-up, foreign institutional investors remained net buyers in Indian markets, indicating that global funds are looking beyond the headlines. With a growing imperative to de-risk from the U.S. after decades of concentrated exposure, India stands out as a structurally strong destination for foreign capital. Arora noted that since the 2008 financial crisis, over $20 trillion was pumped into U.S. markets, and even a partial reversal could direct trillions into emerging markets, with India poised to receive a major share.

Highlights:

• Foreign institutional investors were net buyers despite geopolitical tensions.

• There is a structural global shift toward diversifying away from U.S.-centric investments.

• India is increasingly viewed as a long-term, resilient, and credible investment destination.

Domestic Participation and the Next Leg of Growth

According to Arora, the Indian equity market’s recent resilience has been driven largely by strong local investor participation. However, the game-changer will be the return of foreign investors—not as passive participants but as consistent buyers. The transition from selling to buying by foreign funds, combined with continued support from domestic investors, could usher in the next major leg of growth for Indian equities. Arora stressed that once global funds begin to reallocate even a fraction of their U.S. holdings, India could see unprecedented capital inflows.

Highlights:

• Domestic investors have been the primary support for Indian markets in recent years.

• The entry of foreign investors as buyers could amplify market momentum significantly.

• Structural reallocation of capital globally places India in a highly favorable position.