Market Corrections, Global Uncertainty and the Long View on Investing
Why recent equity market volatility may feel unsettling, but disciplined investing and asset allocation still matter more than ever.
Apr 2026
4 mins read
Share:
The recent correction in equity markets, triggered by the conflict in Middle East, has left many investors searching for answers. It is the question dominating conversations across dining tables, offices and investor forums alike: what exactly is going on? The immediate reason behind the recent market volatility is not hard to identify. Heightened uncertainty arising from the ongoing conflict involving the US and Israel on one side and Iran on the other has acted as a clear trigger.
Armed conflicts of this nature tend to send shockwaves far beyond the geographies directly involved. In this case, the fallout has been visible through a slowdown in global trade and a sharp spike in oil prices, both of which have direct and indirect implications for economies worldwide. However, while geopolitical tension has acted as the spark, it is not the underlying cause. The domestic equity market had been in what can best be described as a neutral to overvalued zone for the last 5 odd years. Market participants were still able to generate returns, but largely in select stocks and sectors.
At an aggregate level, the Nifty 50 has been trading in a remarkably narrow 5%–10% range since its peak in September 2024. This stagnation at the index level occurred because continuous buying pushed stock prices ahead of what could reasonably be justified by fundamentals. Although economic growth and corporate earnings have continued to expand, they have not kept pace with the extent of price appreciation witnessed over this period.
This combination of elevated valuations and an external global shock has resulted in the market becoming vulnerable to fear. India’s corporate fundamentals remain largely strong, yet the risk perception driven by global events has made investors wary of what lies ahead, leading to a correction that feels abrupt, even though it was arguably overdue.
These adjustments in market prices inevitably show up in individual portfolios. Portfolios with a heavy equity allocation are most visibly impacted. The reality is also shaped by a structural shift that has taken place since COVID. A significant number of retail investors entered equity markets during this period. Monthly systematic investment plan inflows into mutual funds rose sharply from around Rs 6000–7000 crore in FY20–21 to more than Rs 30,000 crore today, as per AMFI data. Many of these SIPs have been running only for the last 2–3 years.
For these newer investors, returns may currently appear disappointing. For nearly two-thirds of this period, markets were rising steadily, meaning most SIP instalments were invested at higher levels. With equity prices now correcting, the accumulated units bought at elevated valuations naturally show a lower notional value. This makes recent equity investments appear firmly in the red.
The extent of this impact also depends on how diversified a portfolio is. Investors holding 100% equity portfolios will see sharper notional losses compared to those who have allocated capital across assets such as term deposits, debt funds, PPF, EPF and gold. Diversified portfolios, in many cases, may still be in the green, helped in part by a stellar rise in gold prices. This phase serves as a timely reminder that equity investing is not meant for short-term gratification. It is a 7–10-year process at the very least, and time in the market continues to matter more than timing the market.
This naturally leads to questions around SIPs themselves. An SIP started in a Nifty 50 Index Fund three years ago would likely show flat returns today, giving investors the feeling that their effort has yielded nothing. Even a five-year SIP in the same fund would show only around 6% annualized returns. Some commentators may argue that fixed deposits would have performed better over this timeframe, but such comparisons are flawed, particularly when post-tax returns are considered.
Equity investing is fundamentally different from fixed income products. Deposits are linear; interest rates are known in advance. Equity returns, on the other hand, are uneven and volatile. Periods of stagnation or decline are an inherent part of the journey. The reason investors are encouraged to remain invested for 7–10 years is precisely because this duration allows participation across market cycles, including phases where prices are available at lower valuations.
Historical data reinforces this point. An analysis published by a media house examined market corrections following various armed conflicts over the last 30 odd years, from the Iraq war to the Russia–Ukraine conflict. The findings were consistent: markets typically react negatively to geopolitical uncertainty. Yet, within just 6 months from the lowest point, recoveries have ranged anywhere between 15% and 65%. Long-term trends show that major corrections, regardless of cause, are followed by recoveries that push prices beyond previous peaks within 2–5 years. SIP investors tend to recover faster precisely because they continue investing even during downturns, accumulating more units at lower prices.
This recovery, however, only benefits those who stay invested. Panic selling locks in losses and removes participation from the eventual rebound. The more constructive approach during such phases is to review the quality of existing equity investments. Staying invested and continuing SIPs in well-managed, good-quality funds remains sensible, while funds with consistently poor performance or those lagging benchmarks over long periods can be filtered out and replaced.
Importantly, replacing poor performers should still involve equity for equity. Redeeming from an underperforming equity fund only to move money into a fixed deposit changes the risk profile and derails long-term goals. That said, doing nothing does not mean being complacent. Market corrections offer an opportunity to improve portfolio structure.
If a portfolio was under-diversified, this phase may highlight that gap. Some investors may realise they need greater exposure to fixed-return instruments or gold. Making these adjustments during a correction can be tax efficient, as capital losses booked in equity can be offset against future capital gains.
Another common question during corrections is whether one should increase equity investments when markets fall. From a technical standpoint, a 15% correction in the Nifty 50 has historically been a reasonable point to start incrementally adding equity exposure. Funds with dynamic asset allocation models tend to do this systematically. Individual investors, however, face practical constraints. They may lack conviction, adequate idle cash or the ability to stagger investments over several months. Moreover, individuals invest with specific life goals in mind, unlike fund managers whose sole objective is beating benchmarks.
For investors with significant financial goals in the next 2–3 years, aggressively adding equity during corrections may not be appropriate. Market downturns can persist for two years or more, and capital needed in the near term should remain in low-risk options. Incremental equity investments should therefore always be evaluated through the lens of personal goals and timelines.
Ultimately, asset allocation remains the cornerstone of sensible investing. Portfolio rebalancing is not something to be considered only during downturns. Even during strong rallies, equity allocations can creep higher than intended, breaching planned boundaries. For instance, an investor targeting 60% equity exposure may find it rising to 65% after a prolonged rally, signaling the need to book profits and reinvest in other assets.
Similarly, during corrections, equity allocation may fall below target levels, creating room to add exposure, provided sufficient dry powder exists. Any such deployment should ideally be staggered over 6 to 12 months to smooth risk and reduce reliance on market timing. The discipline of staggered investing, coupled with a clear understanding of goals and asset allocation, remains the most reliable way to navigate uncertain times while leaving high-risk tactical decisions to professional fund managers.
Investors are advised to consult a qualified financial advisor to assess how these market conditions align with their individual financial goals, risk tolerance and long-term investment strategy.
Share:
PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 209 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindia.com/mutual-funds/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindia.com/mutual-funds/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
The information contained herein is provided by PGIM India Asset Management Private Limited (the AMC)
on the basis of publicly available information, internally developed data and other third-party
sources believed to be reliable. However, the AMC cannot guarantee the accuracy of such information,
assure its completeness, or warrant such information will not be changed. The information contained
herein is current as of the date of issuance* (or such earlier date as referenced herein) and is
subject to change without notice. The AMC has no obligation to update any or all of such
information; nor does the AMC make any express or implied warranties or representations
as to its completeness or accuracy. There can be no assurance that any forecast made
herein will be actually realized. These materials do not take into account individual
investor's objectives, needs or circumstances or the suitability of any securities,
financial instruments or investment strategies described herein for particular investor. Hence,
each investor is advised to consult his or her own professional investment / tax advisor / consultant for advice in this regard.
The information contained herein is provided on the basis of and subject to the explanations, caveats and warnings set out elsewhere herein.
The views of the Fund Manager should not be construed as an advice and investors must make their own investment decisions regarding investment/ disinvestment in securities market and/or suitability of
the fund based on their specific investment objectives and financial positions and using such independent advisors as they believe necessary.
