Estate Planning for HNIs in India: Why Every HNI Needs a WILL & Why Getting It Right Matters More Than Ever
June-202612:00 PM
Equity Market Volatility & the Long-Term Investor
If the past few months have felt unusually turbulent, that feeling is understandable. Global markets have been absorbing a confluence of pressures, geopolitical tensions, evolving trade policy, inflation in parts of the world, and persistent questions about interest rate trajectories. Closer home, the Indian equity market has witnessed its own share of sharp intra-year moves.
But here is what the data consistently tells us, across every cycle we have studied: volatility is not a malfunction. It is how markets work. The question is never whether corrections will come: they always do. The question is what a well-structured investor does when they arrive. This piece draws on historical data across multiple decades to help answer that question.
Drawdowns Are Not Exceptions, They Are the Rule
There is a common misconception that market declines represent something going wrong. The historical record tells a very different story. The table below documents every fiscal year from FY02 to FY25, tracking the Nifty 50's maximum intra-year drawdown, how many days markets fell, and how long recovery took.
Table: Nifty 50 drawdown analysis, FY02–FY25.
What this data reveals is striking in its consistency:
- Average Annual Drawdown: -17.78%
- Average Days Markets Fell: ~96 days
- Average Days to Recover: ~278 days
- Median Drawdown: -15.14%
The Nifty 50 has seen an average intra-year decline of 17.78% going back to FY02. The median drawdown is 15.14%. This means a 10–20% correction, which often feels like a crisis when it is happening, is simply the normal texture of equity investing.
What is equally important is the recovery data. Markets have always come back. The average recovery period of approximately 278 days means that investors who stayed the course through the decline were typically made whole within less than a year. Those who sold, locking in permanent losses, did not share in that recovery.
How Markets Have Responded to Major Crises: Seven Decades of Evidence
Beyond normal annual volatility, markets periodically encounter genuine structural shocks: wars, financial crises, pandemics, and geopolitical events. These are the moments that most severely test investor resolve. They are also the moments that have historically offered some of the most compelling investment opportunities.
The table below examines seven major crises over five decades, tracking the Sensex's performance before, during, and after each event.
Table: Sensex performance around major market crises. Data represents 3-year CAGR before and after each event's peak-to-trough fall.
The pattern is remarkably consistent across every crisis:
- The Sensex fell by an average of 47.19% from peak to trough across these seven events.
- In the three years following those declines, the Sensex delivered an average 3-year CAGR of 33.51%.
- Every major crisis that caused a significant decline was eventually followed by a meaningful recovery.
Consider what these numbers mean in practice. An investor who remained invested through the 2008 subprime crisis, when the Sensex fell by 60.90%, and stayed invested for the next three years would have earned a 28.08% CAGR during the recovery period. An investor who sold near the bottom would have missed that recovery entirely.
Across seven major crises spanning five decades, the Sensex declined by an average of 47.19% from its peak and subsequently generated a 3-year CAGR of 33.51% during the recovery phase.
The lesson is not that markets always move upward in a straight line. They do not. The lesson is that the long-term trajectory of equity markets has consistently rewarded patience and consistently penalized investors who exited during periods of maximum fear.
The Three Mistakes Investors Make in Volatile Markets
Understanding market history is important. But knowing what not to do during a correction can be just as valuable as knowing what to do. In our experience working with HNI and UHNI clients across multiple market cycles, three behaviours consistently undermine long-term wealth creation.
Mistake 1. Panic Selling at Market Falls
The Risk:
Selling during a downturn locks in losses permanently and prevents participation in the recovery. History shows that equity markets have rebounded after every period of sustained uncertainty, but only invested capital benefits from that rebound.
Better Approach:
- Stay invested through market cycles.
- View corrections as a normal part of the equity journey, not a signal to exit.
- Allow your capital to participate fully in the recovery phase.
Mistake 2. Stopping SIPs During Corrections
The Risk:
Pausing SIPs during a downturn means missing the opportunity to accumulate units at lower prices. This eliminates the benefit of rupee-cost averaging and can significantly reduce long-term returns.
Better Approach:
- Continue SIPs even during volatile market phases.
- Take advantage of lower market prices to accumulate more units.
- Reduce your average purchase cost over time.
- Position your portfolio for stronger returns when markets recover.
The Bottom Line
Every correction feels different when it is happening. The headlines are different. The stated reasons for concern are different. But the underlying dynamic—fear overcoming discipline and short-term noise drowning out long-term signal—remains remarkably consistent.
The historical response of equity markets to that fear has also been consistent: recovery.
- Markets have recovered from recessions.
- Markets have recovered from wars and geopolitical shocks.
- Markets have recovered from pandemics and financial crises.
- Patient and disciplined investors have historically been rewarded.
At Anand Rathi Wealth, our approach has never changed based on market conditions. Whether the environment is stable or volatile, our objective remains the same: bringing structure and discipline to every decision, so clients can focus on the bigger picture—building and preserving wealth across generations.
