The stock market correction has reopened a question investors had almost stopped debating during the long rally: should investors continue buying every decline? At the peak of the bull market, the answer was an obvious “yes”. But after two years of disappointing performance, has the market entered a phase that warrants a different approach?
Financial Express spoke with senior market experts to understand whether current levels justify fresh allocation, whether India risks a weak phase of market returns despite economic growth, and what investors should watch before increasing exposure. Across conversations, the common view was that the market still offers opportunity, but the approach now requires more discipline than aggression.
Benchmark indices have corrected this year, with the Nifty 50 down around 8% year-to-date and the Sensex lower by roughly 10%. But the picture becomes more interesting beneath the benchmark level.
Meanwhile, one-year return data suggests the market has already moved away from broad-based participation. Nifty Midcap 50 has gained nearly 12%, Nifty Midcap 100 is up around 10%, and Nifty Mid Select has returned more than 16%.
Sector performance tells a similar story. Nifty Metal has rallied nearly 46% over one year, MidSmall Financial Services has returned around 30%, PSU Banks are up nearly 24%, and Pharma has delivered close to 16%. At the other end, Nifty IT has declined more than 20%, Media is down nearly 18%, Realty has corrected around 16% and FMCG has fallen close to 10%.
Don’t try to predict the bottom, says expert
Nilesh Shah, Managing Director at Kotak Mutual Fund, said investors should avoid approaching the current phase as a market timing exercise.
“One can’t predict the bottom of the market. One has to follow the asset allocation. This is a fair value market. If one is underweight equity, one can buy in a calibrated manner,” Shah added.
His view puts discipline ahead of conviction calls.
Instead of asking whether the market has fully corrected, Shah’s argument is that investors should first assess whether their portfolios have drifted away from intended equity allocation.
He also cautioned investors who are already heavily invested. “If one is overweight equity it is time to reduce exposure and create dry powder.”
That advice becomes more relevant when market performance beneath the index remains uneven.
Recent return trends show banks and financials have seen pressure over shorter periods, while sectors such as healthcare and selective industrial themes have held up better. IT remains among the weaker pockets over the last one year.
Valuations have improved, but experts are not calling for aggressive buying
Several market participants believe the correction has made valuations more reasonable than they were six to nine months ago.
Krishna Rao, MD & Co-Head, Equity Broking Group, JM Financial Services, said, “The Nifty-50 one-year forward PE of 19.3x is below the long-term historical average of 20.6x and largely reflects near-term concerns around elevated crude oil prices, a weak INR, and rising inflation. We see limited downside from current levels. A permanent resolution of the West Asia conflict could, in fact, be a meaningful positive for Indian markets, as it would drive a cool-off in crude oil prices and act as a key catalyst for reversing FII outflows.”
Rao added that investors may eventually shift focus back to structural growth drivers.
“Furthermore, investor focus is expected to return to structural growth tailwinds, including: multiple accommodative government policies such as GST rationalization and individual income tax relief; positive outcomes from trade agreements with the US and UK; and a low earnings base over the last two years.”
Near term, he expects markets to consolidate before earnings growth becomes the bigger driver.
Sneha Poddar, VP, Research, Wealth Management, Motilal Oswal, also favoured adding selectively rather than increasing exposure broadly.
“Buying the dip remains a reasonable strategy, but the current environment warrants greater selectivity rather than aggressive broad-based buying. At Nifty 50 level, valuations have turned more comfortable, with the Nifty trading around ~19x FY27 earnings, below its long-period average and India’s EM valuation premium has compressed from 73% to just 27%.”
Poddar said quality businesses in BFSI, healthcare and manufacturing now appear materially better priced than they did earlier.
Sector return data shows where money is moving
Return trends suggest investors are already becoming selective.
Healthcare has remained among the stronger performers, with both pharma and broader healthcare indices delivering double-digit one-year returns. Metals have also surprised on the upside.
On the other side, IT has emerged as one of the biggest laggards over the last year, while FMCG, media and real estate have seen periods of weakness.
Poddar said that positioning reflects where investors see stronger earnings visibility.
“Sectorally, investors are increasingly gravitating toward businesses with stronger earnings visibility, policy support and lower sensitivity to global volatility,” Poddar added.
She said defence remains a structural theme as domestic procurement increased sharply over recent years while exports touched record levels.
“In Energy and T&D, installed power capacity is expected to nearly double to 770–810 GW by FY32, supported by over Rs 19 trillion in committed investments, while ordering momentum across transmission and infrastructure projects remains robust.”
On healthcare, Poddar said, “Pharma also continues to stand out as the China+1 shift increasingly converts into tangible contract wins and the biosimilars opportunity begins to scale up. Export-oriented generic manufacturers remain relatively well-positioned as revenues are largely USD-denominated while costs remain predominantly INR-based.”
She also pointed to improving confidence in private sector banks after recent earnings.
Could India face the same risk as China?
China grew for years, while its market did not. Experts say India’s setup remains different.
One of the bigger questions emerging after the correction is whether India could eventually face the same outcome that troubled China for years: strong economic growth without matching stock market returns.
Experts do not see that as the base case for India, but they say China remains an important reminder that GDP growth alone does not guarantee shareholder returns.
One of the questions resurfacing after this correction is whether India could eventually deliver economic growth without corresponding market returns.
Shah believes the answer depends less on GDP and more on how companies deploy capital.
“Chinese companies, driven by the mandate from the government, focused on investment rather than profitability. Chinese companies kept on diluting their equity to invest for scale and technology. This resulted in Chinese index trading today where it was 17 years before.”
That experience, according to him, should be viewed as a warning rather than a forecast.
“If Indians companies focuses upon investment than profits, dilutes rather than generating return on equity than a situation like China can happen. We don’t estimate Indians cos to follow Chinese path. They will balance between investment and return on equity.”
Rao added that China’s market delivered close to only low single-digit USD returns over the last decade despite rapid GDP expansion.
Poddar said prolonged state-directed investment, property stress, regulatory intervention and weaker investor confidence created conditions where economic growth did not translate into shareholder returns.
She argued India’s structure remains different because domestic institutions have become a stronger stabilising force and earnings remain more tied to private-sector execution.
What investors should watch before increasing exposure
Experts broadly agreed that fresh buying should depend on incoming data rather than sentiment.
Poddar said, “Crude oil remains the single most important variable.”
She added that rupee stability, FII behaviour, RBI policy signals and Q1 FY27 management commentary could decide whether earnings assumptions remain intact.
Sunny Agrawal, Head – Fundamental Research, SBI Securities, said investors should focus on multiple variables together.
“Before increasing the exposure to equities, one should anchor their decisions around a combination of (i) Macro stability, (ii) Earnings trajectory, (iii) Liquidity conditions and (iv) Valuations.”
Agrawal said inflation trends, RBI policy direction, earnings breadth beyond large financials, liquidity conditions and valuation comfort should drive positioning decisions.
He also said investors cannot ignore oil prices and geopolitical developments because of their impact on inflation, margins and foreign flows.
Conclusion
This year’s correction has changed the conversation from whether investors should buy the dip to how they should buy it.
Markets are no longer moving in one direction, and sector performance has become increasingly uneven. That makes broad-based aggression harder to justify.
The message from experts is more measured: add gradually if allocation allows, stay selective, and focus on earnings and fundamentals instead of trying to identify the exact market bottom.
As Shah put it, investors should spend less time predicting and more time sticking to allocation.
Disclaimer: The market observations, sector return metrics, and expert commentaries discussed in this report are based on institutional analysis and macroeconomic trends and do not constitute direct buy, sell, or hold recommendations, or specific market-timing advice for retail investors. Equity investments, including large-cap, mid-cap, and sector-specific allocations, carry inherent market risks, and previous performance or valuation multiples do not guarantee future returns. Because individual portfolio requirements, asset allocation targets, and risk tolerance levels vary significantly, readers are strongly advised to consult a SEBI-registered investment advisor or a qualified financial professional before executing any fresh capital allocations or altering their existing investment strategies.
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