‘Separating emotion from strategy’: Is tactical investing the antidote to fear in a volatile market?

With geopolitical tensions dominating global headlines over the past month or so, Indian stock market has been at a crucial crossroads. Investors have been grappling with short-term uncertainties even as they are keeping an eye on long-term growth opportunities.

Over a month, the BSE Sensex rose by 4,675.58 points, or 6.09%, to touch 81,410.47 as of Tuesday. The index saw a sharp dip around May 10, briefly falling below 79,000 before rebounding strongly. The highest point was near 82,000 just before a slight decline on Tuesday.

The equity market has begun to feel the weight of caution as conflicts and instability simmer across borders. “The short-term outlook for stock markets will largely depend on how the current geopolitical tensions play out,” says Santosh Joseph, CEO of Germinate Investor Services, underlining how war-like situations typically slow down market activity in the recent past.

According to him, whenever global tensions flare up, investors instinctively move toward safety. Equity markets, known for their volatility, lose appeal during uncertain times. “The uncertainty reduces risk-taking, and this often leads to lower market activity,” he explains. This trend is further reinforced by a psychological response—when investors are unsure of what lies ahead, they prefer to wait and watch rather than act.

Even corporates, says Joseph, may postpone investment decisions, which can further dampen overall market sentiment. Until there's clarity on the global front, equities may stay under pressure.

However, Joseph is quick to remind that such phases are cyclical. “Markets have always moved through such phases in the past and recovered eventually. So, while the short-term picture may seem uncertain, the long-term story of growth remains intact.”

He also draws a critical distinction between tactical investing and emotional decision-making, something that many investors often confuse in times of volatility. “Tactical decisions are thoughtful and planned,” he says, “while emotional decisions happen when fear or excitement takes over.” Panic-selling during a dip or impulsively buying into hot sectors are clear examples of what not to do.

Tactical investing helps you actively manage a portfolio based on anticipated market trends or changes in outlook. By using the right strategy, it improves the risk-reward characteristics of the portfolio, increases overall returns, or preserves capital.

To navigate these times, experts generally suggest self-awareness. “If you are making changes to your portfolio, ask yourself why you are doing it. Is it based on facts and planning? Or is it a reaction to headlines and temporary fear?” The key, experts say, is to stay anchored to one’s long-term financial goals and follow a tactical approach.

When it comes to investment opportunities, Joseph encourages investors to think beyond specific sectors. While healthcare, essential consumer goods, and financial services show long-term potential, his advice is to go for diversified equity mutual funds. “Rather than choosing sectors, it is better to be in well-diversified portfolios that can capture the dynamic changes in the economy,” he notes.

In a climate of fear and uncertainty, wise investing means separating emotion from strategy. As Joseph puts it, “Tactical investing helps you make the most of opportunities. Emotional investing often leads to regret.” For investors today, the message is clear—stay calm, stay diversified, and trust the long-term fundamentals.