Market Volatility and Workforce Resilience: Shaping the Next Generation of Talent

September 2024, the Nifty 50 stock market index touched an all-time high of over 26,000! 

From the market bottom when the Covid-19 pandemic struck in March 2020, the Nifty returned a CAGR of ~30% for 4 consecutive years, which is considerably more than the generally accepted figure of 12% for sustainable equity returns.

However, for over 18 months now, the Nifty has been unable to generate positive returns. Currently, it sits right below the 24,000 mark, with a CAGR of -5% over that holding period. Almost every other major global stock market index outperformed the Nifty 50 since then, leading to a lot of gloom and doom for Indian investors who have not seen their portfolio grow in almost 2 years now. 

In addition to lagging stock market returns, investors have also had to bear the brunt of a weakening Indian rupee against almost all major currencies. 

This begs the question - is it over for Indian equites? The answer, in short, is no. 

To put things into perspective, the post-Covid boom in India from March 2020 to September 2024 was the best ever performance delivered by the Nifty 50 since its inception in 1996. There were a multitude of factors that led to such unprecedented growth: near-zero global interest rates which greatly pushed capital flows towards emerging markets; an explosion in retail investing by Indians supercharged by online brokers such as Zerodha and Groww; and a strong post-pandemic surge in domestic demand. 

For over 4 years, Indian corporates delivered excellent results, beating analyst estimates quarter after quarter, leading to consistent institutional and domestic inflows into the Indian stock market. 

The Nifty 50 comfortably beat every single major stock index in this 54 month period. At the same time, the number of demat accounts in the country grew nearly 3 times from around 50 million to 140 million. 

People just couldn’t miss this opportunity of a lifetime, and millions of Indians without any prior experience in the financial markets became ‘retail investors’ overnight. All we saw was green on our broking platforms and sentiments were as bullish as it gets. 

However, all good things must come to an end. 

As inflation numbers started rising in the US after the Covid boom, the Federal Reserve aggressively began to raise interest rates. The Fed Funds Rate (the policy rate targeted by the US Federal Reserve) went from a decadal-low of 0.25% in March 2020 to 5.5% in July 2023. This was bad news for India, as considerable foreign institutional capital started flowing back to the now higher yielding dollar-denominated assets. FIIs, who were net buyers of Indian equities through the boom turned into net sellers in 2024. Since then, FIIs have pulled out over INR 4 lakh crores from the Indian stock market.

India’s macroeconomic picture added to the headwinds. Strong FII outflows led to depreciation of the Indian rupee, which led to further institutional outflows, creating a self-reinforcing feedback loop. More recently, the surge in oil prices has widened India’s current account deficit, further pressurizing the INR. 

This has felt like a crisis to the Indian retail investing community at large. 

However, I present the case that it is a correction which had to happen at some point. 

Since its inception, the Nifty 50 has delivered a long-run CAGR of approximately 12%. This includes multiple bear cycles - including the dot-com bust in 2000, the global financial crisis in 2008 and other periods where the market has gone sideways for several years. The S&P 500, since its inception in 1957, has also delivered a long-run CAGR of ‘only’ 12%. As such, bear runs are part and parcel of even the most successful stock markets in the world. 

Interestingly enough, if we zoom out a bit further, we can see that the Nifty has returned 13.5% since March 2020, which is in line with historical averages.

Despite significant challenges, India’s growth story largely remains intact. Real GDP growth for FY26 is estimated at 7.6%, and inflation, despite a recent uptick due to the oil shortage, rests well below 4%. The unemployment rate has also moderated at the 5% range. 

India’s resilience has been fuelled by relatively strong consumption demand. Revision of the income tax slabs in the 2025 Union Budget, followed by GST 2.0 in September 2025 were both forces supporting domestic demand. Additionally, record budgetary allocations to capital expenditure has supported employment and ensured India’s investment-to-GDP ratio remains stable at a time where corporate investments have been subpar. 

Right before the US-Iran conflict began, the IMF and World Bank had both upgraded India’s GDP estimate for FY26 and 27. Prior to that, India’s sovereign debt saw its credit rating upgraded by several global ratings agencies throughout 2025. 

As such, it is not a far cry to contend that laggard stock market performance is greatly attributable to a sustained global risk-off sentiment, and not necessarily a breakdown in the fundamentals of the Indian economy.  

So, what does this mean for the millions of young investors who have seen their wealth erode over the past 2 years? 

It is important for young Indians to internalize the fact that their single biggest structural advantage is their investment horizon. The median age of the Indian population is 29, which implies roughly four decades of compounding that the average Indian can benefit from. As the old adage goes, time in the market beats timing the market.

The practical implication is straightforward - a systematic investment approach into diversified equity, be it through mutual funds or direct exposure to index funds is not a strategy that needs to be abandoned because of temporary market fluctuations. Cost averaging during bear cycles, or buying when relative valuations are cheap, as is the case with the Nifty right now, has proven to be an effective strategy in the long-run which enhances returns by lowering an investor's overall cost base. 

What the current market demands is patience, and as Charlie Munger, one of the most successful investors of all time, said, “the big money is not in the buying and selling, but in the waiting”.