The stock market naturally rewards patience over impulsive reactions, transferring wealth from those who chase short-term movements to those who stay committed to a long-term strategy. This principle is especially relevant today as the BSE Sensex, which soared to about 85,800 in September 2024, has since dipped to almost 73,100.
This decline reflects global trade disputes, rising geopolitical tensions, and capital outflows driven by a stronger US dollar, leading to short-term volatility.
Concerns over protectionist policies in the US and fluctuations in global interest rates have kept investors on edge. Despite positive domestic indicators such as resilient GDP growth and easing inflation, global headwinds have overshadowed these gains, contributing to the market’s recent struggles.
Staying the course
India’s structural growth drivers remain intact. The nation is seeing a respectably strong capital expenditure expansion, which is boosting employment and production in industries such as power, auto, and telecommunications. The rapid digital transformation and a rising middle class, estimated to encompass approximately one-third of the nation’s 1.4 billion population, play a pivotal role in driving consumption.
Over the past few months, there’s been a severe sell-off in the market. The median price-to-earnings of BSE500 constituents has fallen from 44x in September 2024 to 32x in February 2025. Historically, market downturns have provided disciplined investors with opportunities to accumulate high-quality assets at attractive valuations.
While short-term volatility can be unsettling, the markets tend to expand over time, driven by economic progress and innovation. With proactive government initiatives and a rapidly evolving digital economy, the current correction presents a crucial window for strategic, goal-oriented investment decisions.
For an investor with a 15-year horizon, a market downturn isn’t just a phase to endure—it’s an opportunity. A 15-20% decline in portfolio value may seem unsettling, but it also means that high-quality assets are now available at more attractive valuations.
By continuing to invest systematically and staying committed to their goals, long-term investors can capitalise on these lower prices, setting the stage for significant future gains when the markets rebound.
On the other hand, for someone nearing retirement in the next few years, a similar downturn underscores the importance of aligning investments with financial timelines—reinforcing why goal-based investing is essential for managing risk and sustaining growth.
Re-aligning portfolios
As market conditions evolve and investor sentiment shifts, there are bound to be potential growth opportunities in the next phase of the cycle. This transition presents a crucial window for investors to realign their portfolios, ensuring they are positioned to capitalise on future growth while staying committed to their long-term financial goals.
Portfolio rebalancing ensures investments remain aligned with long-term objectives, especially during volatile periods. During market dips, this could mean increasing exposure to undervalued equities while maintaining adequate diversification to manage risk.
Increasing contributions through SIPs (systematic investment plans) during market downturns can help with rupee cost averaging and also positions investors to benefit from the eventual recovery.
Investors should focus on structuring their portfolios around specific objectives—whether it’s financial independence, wealth preservation or retirement planning. Ensuring adequate liquidity for short-term needs is equally important, as having a well-maintained emergency fund and allocating assets to liquid instruments can prevent the need for forced withdrawals.
Understanding one’s risk appetite is equally critical. Market downturns often provide an opportunity to accumulate assets at lower valuations, but the strategy must be tailored to an investor’s ability to withstand fluctuations. Those with a higher risk tolerance can increase exposure to equities, while conservative investors may seek a balanced approach with diversified asset allocation.
The key to financial success lies not in predicting short-term movements but in staying invested, following a structured plan and maintaining discipline. The key is to focus on financial goals rather than react to short-term market noise.
Investing without a plan is like boarding a flight with no destination—turbulence will feel a lot worse.
TARUN BIRANI is Founder and CEO of TBNG CAPITAL ADVISORS
