2025 has been a year that has tested every investor’s patience. A part of what markets are doing now was always on the cards, and a part has genuinely surprised even seasoned experts. Yet beneath the current volatility, the bigger story is intact: India’s economy is strong, earnings are expected to improve, and 2026 is shaping up to be a much better year for equity investors than 2025.
What really happened in 2025
Headline indices like the Nifty and Sensex have held up reasonably well, but that headline strength hides deep pain in the broader markets, especially small and midcaps. Overvaluation in select pockets, frothy IPOs at high valuations and the unwinding of leveraged positions have triggered sharp corrections, even in otherwise sound businesses. Add to this delayed growth in some sectors due to weather disruptions, policy timing, and global trade frictions, and you get the kind of choppy, confusing market that investors see today.
The bigger picture: India is still on track
Step back from daily price moves and the macro picture is far more encouraging. India’s GDP is projected to grow around 6.5–6.8% over FY 2025–26 and beyond, supported by domestic consumption, moderating inflation and stable to softer interest rates. By any standards, it is really big for a large economy like India. Policy support in the form of tax cuts and GST tweaks is adding to disposable income, while lower inflation and a steady rate environment are typically positive for both businesses and markets.
Yes, there are genuine concerns: pressure on government capital expenditure, the politics of freebies, and higher US tariffs weighing on exports. But even global institutions see these as headwinds, not roadblocks, with India still expected to remain one of the fastest-growing major economies in 2026 in the whole world.
Why 2026 could be a strong year
Several global and domestic brokerages now expect 2026 to be a constructive year for Indian equities, with the potential for double-digit returns as earnings recover and valuations normalize. After the reset of 2025, broader market valuations in many sectors look far more reasonable, and any stabilisation in global trade tensions or AI-driven global rotation could funnel more capital towards India.
In simple terms, 2025 has been the “shake-out”; 2026 is likely to be the “build-back” phase where patient investors are rewarded. That transition is exactly when disciplined
www.humfauji.in 9999 053 522 / 9999 838 923 contactus@humfauji.in
mutual fund investing tends to work best rather than individual stock investing, unless you are confident of the latter on your own steam.
What retail investors should do now
When markets are volatile, timing the bottom is almost impossible—but using volatility is absolutely possible. Systematic Investment Plans (SIPs) in mutual funds are designed for exactly this environment: they invest a fixed amount regularly, buying more units when markets are down and fewer when they are up, averaging your purchase cost over time. This “rupee cost averaging,” combined with the power of compounding, has made SIPs the preferred route for millions of Indian investors; monthly SIP inflows in India have already scaled record highs in 2025.
For retail investors today, three clear action points stand out as I can see:
- If you are not investing via SIPs, this is the time to start and let volatility work for you rather than against you.
- If you already have SIPs, consider stepping them up so that more of your money participates as markets and earnings recover into 2026.
- If you have a bulk amount to invest, do go in now through Systematic Transfer Plans (STPs) with a keen eye for bulk transfers when the need arises. Of course, Hum Fauji clients have seen this being done by us time and again to benefit them.
- Stay focused on time in the market through diversified mutual funds, not timing the market with short-term reactions to every headline.
2025 has given enough reasons to worry in the short term, but the data and the direction both point to opportunity over the next few years. Those who use this phase to steadily build their mutual fund portfolios through SIPs are likely to look back at this volatility not as a threat—but as the turning point where long-term wealth creation truly accelerated !
Col Sanjeev Govila (retd)
CEO
Hum Fauji Initiatives
14th Dec 2025
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