Bottom Fishing: The market beckons after 18 months of pain

EIGHTEEN MONTHS INTO a grinding market correction, India’s benchmark Nifty 50 has shed nearly 25 per cent from its January 2025 peak, dragging the Sensex into bear territory. Inflation spikes, a sluggish monsoon, and geopolitical jitters over rare earth supply chains have battered investor sentiment. Yet, as blue-chip valuations flirt with decade-low multiples, savvy investors are eyeing a rebound. Is this the trough, or just a pause before more downside?

The correction kicked off in late 2024 amid RBI’s aggressive rate hikes to tame 7.5 per cent CPI inflation, squeezing corporate margins. IT giants like TCS and Infosys, once darlings, now trade at forward P/E ratios of 18x—cheaper than their 10-year average of 25x. Banking heavyweights such as HDFC Bank and ICICI Bank, battered by rising NPAs in unsecured loans, offer yields north of 2.5 per cent with book values at 1.8x.

Macro tailwinds are aligning. RBI’s pivot to rate cuts—75 basis points

since December 2025—has eased borrowing costs, fuelling capex in sectors like renewables and infrastructure. India’s rare earth push, with new mines in Odisha ramping up amid China tensions, bolsters de­fence and EV plays. Gen Z investors, armed with apps like Groww, are piling in: demat accounts hit 150 million, up 40 per cent year-on-year, chasing discounted small caps in fintech and consumer goods.

Risks linger, though. US recession fears could trigger FII outflows—foreigners have dumped `2 lakh crore since the peak. Monsoon deficits threaten agri-linked stocks, and policy paralysis ahead of state elections had added volatility. Still, domestic mutual fund inflows hit `20,000 crore monthly, a record, signalling retail resilience.

For long-term players, this feels like 2009 redux: a correction pruning

froth before a bull run. SIPs in Nifty 50 ETFs now yield 12 per cent an­nualised returns from correction lows. As one Delhi trader quips, “Mar­kets climb a wall of worry.” With earnings season looming, the next 6-12 months could mark the pivot from capitulation to conviction.