Geopolitical risks are a critical concern for financial markets, influencing investor sentiment, capital flows, and stock returns. These risks, arising from events such as regional conflicts, trade wars, and political instability, can disrupt market stability, particularly in emerging economies like India. This paper delves into the theoretical dimensions of geopolitical risks, analysing their mechanisms and implications for the Indian stock market. It highlights how such risks influence market behaviour through increased volatility, altered investment flows, and sector-specific impacts. Using notable examples, the paper illustrates the tangible effects of geopolitical events on Indian indices and sectors. It also proposes theoretical mitigation strategies, including diversification, hedging instruments, and policy interventions. By emphasizing a theoretical approach, this study provides a framework for understanding and managing the complexities of geopolitical risks in Indian financial markets.
Indian stock market, Investor sentiment, Geopolitical risks, Market volatility, Mitigation strategies
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