Indian equities finished 2025 with an 8% gain and only a 9% fall from their highest point during the year – a surprisingly calm ride despite global trade tensions.
Why 2025 Felt So Steady
Even though late‑2024 saw corrections and US tariff pressures, the Sensex managed a maximum drawdown of just 9% and still ended the year up 8%.
How This Year Compares Historically
In the past 30 years, only eight years (including 2025) saw an intra‑year drop of 10% or less. On average, the Sensex fell about 20% during a typical year, with three groups emerging:
- 8 years – dip ≤10%
- 11 years – dip between 10% and 20%
- 11 years – dip >20%
When the drop stayed under 20%, the market ended the year positive in almost every case.
What a Small Drawdown Means for Investors
Experts say a correction of up to 20% usually reflects a temporary pricing adjustment rather than a fundamental problem. The dip often leaves key support levels intact, turning the slump into a buying opportunity.
Buying the Dip?
Senior VP of research at Axis Securities, Rajesh Palviya, notes that historically, such corrections have been good entry points for long‑term investors. The market typically recovers without breaking major trend lines.
When to Be Cautious
If a drawdown exceeds 35% – as seen in 2001, 2008 and 2020 – the probability of a negative year‑end return rises sharply. At that point, long‑term support levels often break, leading to deeper sell‑offs.
Is Low Volatility Here to Stay?
Fund manager Harsh Gupta Madhusudan says the calm is more about a balance between domestic SIP inflows and fresh supply from IPOs, QIPs, and promoter exits. A sudden surge of foreign money could lift volatility again, even though India may stay calmer than many global markets.
Takeaway for Retail Investors
- Small, contained drawdowns (<20%) are usually not a sign of trouble.
- They can provide a chance to add to positions at lower prices.
- Watch for larger corrections (>35%) as potential warning signs.
Remember, this is perspective, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.