The Great Accumulation Window

I have watched Indian markets through many budget cycles, a few major global financial crises, and more ‘India is over’ headlines than I care to count. Every single time, the noise eventually gave way to the numbers. And right now, the noise is exceptionally loud, which, in my experience, is precisely when you should be leaning in, not stepping back.[EasyDNNnews:PaidContentStart]

Let’s start with what the bears are celebrating. The Nifty is down roughly 12 per cent from its recent peak in January, while the MSCI World Index is down by only two per cent, while Asia ex-Japan has surged by six per cent in the same period and 35 per cent in the last one year. Foreign institutional investors pulled out `64,000 crore in March (till March 16, 2024) alone from the Indian equity market, the rupee hit a record low, and geopolitical tension rattled risk appetite globally. On the surface, that looks like a damning report card. But peel back the narrative and you’ll find something far more interesting, India didn’t fall apart; it simply got left out of a rally fuelled largely by momentum and positioning. That’s a very different thing.

Now here is where I want you to pay close attention, because the data makes a remarkably strong case. Historically, every time the Nifty 50’s trailing P/E has crossed 24, whether it went to 25, 26, or even 28, the market has typically been near a short-term peak. We saw it in 2008, around 2018, and again at the end of 2021. A P/E above 24 has reliably been a warning sign, and if you were investing at those levels, you needed a 5-7 year horizon to absorb the inevitable pain. The flip side of that data, however, is far more compelling. Whenever the Nifty P/E has dropped to 20 or below, the subsequent 12-month returns have been striking, roughly 130 per cent in 2009-10, 42 per cent in 2013, 13 per cent in 2016, 38 per cent in 2020, and over 22 per cent through mid-2022. Market troughs, in most of these cycles, formed right around or below a P/E of 20. Today’s normalised Nifty P/E sits at approximately 20.02x. The forward P/E is around 17.45x. These are historically the coordinates where bottoms are built, not where bull markets die.

What makes this moment psychologically treacherous, and therefore opportunity-rich, is the narrative that always accompanies these valuation levels. At peak P/Es of 24-25, everyone is euphoric: India is an infrastructure miracle, manufacturing is booming, jobs are multiplying. But the moment valuations compress below 20, the same commentators declare that everything is finished, no infrastructure, no jobs, politics will derail development. I have lived through enough of these sentiment cycles to tell you with confidence, the story changes, but the valuation band doesn’t lie. Tune out the narrative. Watch the numbers.

The policy architecture being assembled around this moment gives me additional conviction. On the sector side, manufacturing’s shift towards medium and high-technology industries, now nearly half of value added, signals something more durable than cheap-labour assembly. And the Nifty IT Index’s 15.5 per cent single-month selloff on AI disruption fears is, in my reading, an overreaction worth exploiting. These firms are pivoting into AI integration, and their dollar revenues are a natural rupee hedge.

Yes, the market could fall another 2-5 per cent from here depending upon how the situation pans out in the Middle East. Nobody times the exact bottom. But here’s what two decades have taught me, bear markets are not crises to survive, they are classrooms to exploit and entry points to cherish. India is a $4.3 trillion economy on a credible path to $7.5 trillion by 2030. The structural story is intact. Only the entry price has improved. Build systematically, use a staggered manner to invest to neutralise timing risk, and anchor to the Nifty 50. This window, like those before it, will eventually be remembered as the one most people missed but not you.

RAJESH V PADODE
Managing Director & Editor

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