Whenever geopolitical tensions rise, markets start behaving differently. Capital slowly moves from risk assets to protection assets. But the question is — where does money usually go during uncertain times?
Let’s break down how some key ETFs typically behave.
Defence ETF – Geopolitics Play
When tensions rise, defence spending usually increases globally. This often benefits defence companies and the ETFs tracking them.
Some defence-focused ETFs tracking India’s defence sector have delivered ~34–41% returns in recent periods, outperforming even gold ETFs during strong sector rallies.
Why they perform:
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Governments increase defence budgets
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Strategic manufacturing gains attention
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Long-term policy support
But remember — defence is still an equity sector, so volatility remains.
Pharma ETF – Crisis Beneficiary
Healthcare and pharma often become defensive plays during global stress.
Why investors look at pharma:
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Demand for medicines remains stable
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Export-driven companies benefit during currency volatility
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Seen as a defensive equity sector
Historically during global crises like pandemics or supply disruptions, pharma stocks tend to attract investor flows.
Gold ETF – Classic Safe Haven
Gold has always been the go-to hedge during wars and uncertainty.
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Gold prices have surged strongly in recent years, and gold ETF AUM in India has grown sharply, with corporate participation increasing significantly.
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Institutional investors use gold to protect capital and diversify portfolios.
Gold typically benefits from:
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geopolitical risk
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inflation fears
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currency instability
This is why gold is often considered portfolio insurance.
Silver ETF – Higher Beta to Gold
Silver tends to move with gold but is far more volatile.
In fact, silver ETFs have delivered very strong returns in certain periods — even up to ~175% in a year, compared with about 83% for gold ETFs in the same period.
Why silver can spike:
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Precious metal demand during uncertainty
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Industrial demand (electronics, solar)
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Smaller market → bigger price swings
But volatility cuts both ways.
GSEC ETF – Stability Play
Government bond ETFs (GSEC ETFs) are often the most stable option during uncertainty.
Why they attract flows:
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Backed by government securities
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Lower volatility compared to equities
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Interest rate expectations drive returns
Investors seeking capital preservation often move here.
So where does money usually flow in wartime?
Typical capital rotation:
Risk-Off → Safe Havens
• Defence ETF → geopolitical beneficiaries
• Pharma ETF → defensive sector
• Gold ETF → safe haven asset
• Silver ETF → high volatility metal play
• GSEC ETF → capital preservation
Interesting observation
In most geopolitical shocks:
Gold and bonds protect capital,
Defence and pharma capture opportunity,
Silver amplifies the move.
Curious to hear from the community:
If geopolitical tensions escalate, where would you allocate first?
• Defence
• Pharma
• Gold
• Silver
• GSEC
Or a mix of all?
Disclaimer -https://enrichmoney.in/download/disclosures_in_research_reports.pdf