Skip links

History Tells Us to Invest Now

Published on: Published in: Equity

History Tells Us to Invest Now

Dear Investor,

Recent market volatility driven by geopolitical conflicts, crude oil price swings, and currency movements may feel unsettling. However, historical data and core domestic fundamentals show that the long-term investment thesis for Indian equities remains robust.

1. Crude Oil & Rupee Shocks: Contrarian Indicators

  • Geopolitical Crude Spikes Resolve Quickly:
    Historical data across nine major crude oil spikes since 1990 shows that geopolitical shocks typically resolve within 30 weeks. 5 of the last 7 geopolitical spikes saw strong forward market recoveries—such as the +51.2% Nifty 500 1-year forward return following the 2003 Iraq War spike.
  • Rupee Weakness Precedes Gains:
    During 8 major Rupee depreciation episodes (≥10% over 18 months) since 2008, the benchmark posted positive 1-year forward returns in 7 out of 8 cases. The average rebound following extreme currency pressure has historically favoured buyers over sellers.

2. Domestic Financial Health & Liquidity Drivers

  • Credit Growth Acceleration:
    Banking sector health is near multi-decade highs, with gross NPAs down to 1.8% and industrial credit growing at an impressive 17.5% YoY through May 2026.
  • FCNR(B) Inflows Cushion Rupee Liquidity:
    Foreign currency deposit flows (FCNR-B) continue to bolster Forex reserves, giving the central bank headroom to maintain comfortable domestic rupee liquidity while curbing extreme currency volatility.
  • Earnings & Anti-AI Positioning:
    Aggregate corporate earnings are projected to expand in low double digits through FY27. The First Quarter earnings of FY27 have come in strongly across the board. The GDP growth print has also come in at 7.8%, belying the ongoing conflicts. Furthermore, global allocators are increasingly viewing India as a preferred alternative allocation away from heavily indebted capital-expenditure trades abroad.

Key Reasons to Invest at the Current Juncture

  • Attractive Entry Points:
    Market consolidation has brought valuation multiples back toward historical medians, offering favourable risk-reward setups for
    systematic investments.
  • Strong Domestic Liquidity:
    Record SIP inflows and domestic institutional participation continue to absorb foreign selling pressure, insulating domestic growth assets.
  • Resilient Corporate Balance Sheets:
    Multi-decadal low NPAs in banking combined with strong industrial credit growth (17.5% YoY through May 2026) provide a solid operational foundation.

Key Risks to Consider

  • Prolonged Global Geopolitics:
    Extended delays in resolving Middle East or European conflicts could keep energy prices elevated longer than historical averages.
  • Sustained Currency Volatility:
    While history favours equity recoveries post-depreciation, severe capital flight or extended currency weakness remains an ongoing short-term risk.
  • Earnings Slowdowns:
    Any unexpected drag in earnings expansion across key sectors could impact broader market multiples.

Recommended Strategy

Volatility creates disciplined buying opportunities. We recommend continuing your existing Systematic Investment Plans (SIPs) and utilizing market dips for staggered lump-sum allocations into Flexi-cap, Large & Mid-cap, or Hybrid funds aligned with your risk profile.

Please reach out if you would like to review your asset allocation or portfolio alignment.

You may also like