Equity Markets Update — The Accumulation Phase

During the strong rally from 2020 to 2024, equity markets moved almost in a straight upward trajectory, with limited meaningful corrections. Over the last 12–18 months, however, we have witnessed a phase of consolidation and intermittent drawdowns. This is a healthy and necessary part of any market cycle.

Just like in cricket, a batsman who scores a century one day may get out for zero the next. Markets behave similarly. Periods of exuberance are followed by phases of mean reversion.

For investors, the key is not predicting short-term movements, but understanding market dynamics and aligning investments with clearly defined goals, return expectations, and risk tolerance.

Over our recent communications, we have consistently highlighted that we are in an accumulation phase — a period that often feels uncomfortable but historically has been the most rewarding for disciplined investors.

Having managed portfolios across multiple cycles over the past 15 years, one consistent observation remains: the best time to invest rarely feels comfortable.
Today’s environment — shaped by geopolitical tensions, tariff discussions, technological disruption (AI), and global growth concerns — reinforces this sentiment.

As Warren Buffett famously said:
“Be fearful when others are greedy and greedy when others are fearful.”

Current valuations of India and World markets:

A common question we are receiving is whether to invest now or wait for markets to correct further.

If we could consistently identify market bottoms, investing would become prediction rather than discipline. Timing markets with precision is extremely difficult and often counterproductive.

While mid and small caps remain relatively expensive, earnings growth in this segment has been strong. Completely avoiding them may lead to missed long-term opportunities. The key lies in appropriate allocation and disciplined position sizing, not binary decisions.

Long Term Asset Combinations — 10Y Period (2016–2025)

Returns Distribution (3Y Rolling)

Asset Allocation — The Real Return Driver

Over the last decade (2016–2025), diversified portfolios have demonstrated the power of balanced allocation:

Equities delivered superior long-term returns but with higher volatility
Debt and cash provided stability and downside protection
Gold acted as an effective diversifier
Balanced portfolios achieved strong returns with significantly lower drawdowns

Notably, a 50:50 equity-debt portfolio delivered returns comparable to a 75:25 portfolio but with materially lower volatility, reinforcing that portfolio construction matters more than asset selection alone.

Power of Compounding

Investor Behaviour Matters More Than Market Levels

In every cycle, there will be asset classes that appear expensive and periods where sentiment turns negative. However, shifting entirely to fixed deposits or savings during uncertain phases often leads to a significant opportunity cost.

Long-term wealth creation is driven by:

Consistent participation
Disciplined allocation
Patience through cycles
Allowing compounding to work uninterrupted

As Albert Einstein described, compounding is often called the “eighth wonder of the world.” Once the right allocation aligned to financial goals is established, time and discipline become the most powerful drivers of wealth creation.