Markets Update: When the Going Gets Tough, Allocate Capital Smartly

In the last few months, one name has dominated global headlines — Donald Trump. Markets have been on edge ever since he took oath as President. But here’s the real question: can the fall in Indian markets be pinned entirely on him?
Let’s dig in.

Markets and Earnings – The Real Story

At the end of the day, market returns are slaves to earnings. And earnings in the last couple of quarters have been stuck in the mid-to-late single digits. At the same time, valuations of most indices are still trading above their long-term averages.

That combination naturally calls for a time and price correction. And that’s exactly what we’re seeing play out.

Will this last forever? Unlikely. Earnings should pick up sooner than later. Yes, U.S. tariffs will shave off some growth (to the tune of 0.4%–0.5% of GDP), but the bigger story lies elsewhere — in the stimulus that’s already fuelling India’s growth engine.

The India Advantage

Here’s why the outlook isn’t all doom and gloom:

Fiscal and Monetary Push
- Repo rate cut by 100 bps + CRR cut of 100 bps → INR 2.5 tn liquidity in the banking system.
- Direct tax reduction → INR 1 tn more in taxpayers’ pockets.
- GST rejig → another INR 1.8 tn benefit for households.
Structural Strengths
- Rising domestic consumption.
- Policy tailwinds like Make in India and rapid digital adoption.
- Strong fiscal discipline, record FX reserves, and favorable demographics.

Put together, these factors make India a domestic-demand-driven growth story, and that’s exactly what global investors are eyeing.

What Investors Often Forget

We’ve said this before: investing is not just about art and science — it’s also about emotional management.

In today’s world of non-stop data and media noise, investors often get swayed. Two common pitfalls we see all the time are:

Recency Bias: Looking only at recent returns and chasing what’s hot.
Hindsight Bias: Saying “I should have invested in XYZ earlier” after the fact, forgetting the risks that existed then.

As Warren Buffet famously reminds us:
“Be fearful when others are greedy, and greedy when others are fearful.”

A Look Back at the Numbers

Over the last 10–15 years, India’s nominal GDP and Nifty earnings have grown at 13–15%.

If current returns feel muted, that’s because markets had a strong run in the last five years. Aggressive investors wanting more upside must also accept higher volatility and bigger drawdowns.

The Playbook for Today

Two principles stand tall in times like these:

Asset Allocation is Everything – Match your goals with your risk profile, then build your portfolio accordingly.
Don’t Try to Time the Market – It’s tempting, but risky. The smarter move is to stay invested with balance — not going all in, not staying all out.