Stock market returns non-linear, 10 pc plus intra-year drops seen 22 times in last 25 years: Motilal Oswal

New Delhi [India], : The Indian stock market has historically witnessed significant volatility, with intra-year drawdowns of 10 per cent or more recorded in 22 times out of the last 25 years, according to a recent report by Motilal Oswal.

The report highlights the non-linear nature of equity market returns, reminding investors of the need to brace for periods of sharp market corrections.

It said "Equity market returns are not linear. Markets have witnessed intra-year drawdowns of 10% or more in 22 out of the last 25 years".

The report emphasized that patience and a long-term perspective are essential for investors. It cited the 2008 global financial crisis as an example, when the Nifty 50 Index crashed by 52 per cent. Only those investors who stayed invested reaped benefits from the 71 per cent recovery rally in 2009.

It also noted that the era of easy gains in the stock market, where broad market rallies benefited all sectors, may be behind us. The focus, it said, should now shift to identifying companies with strong fundamentals and sustainable growth, rather than chasing market trends or short-term popularity.

India's growing prominence in global equity markets was another key takeaway from the report. The report stated that the country has risen in market cap rankings from 17th in 2013 to 5th today. Its contribution to the global market cap has also surged, growing from 1.7 per cent in 2013 to around 4.3 per cent.

This growth has been underpinned by India's strong macroeconomic fundamentals, including robust GDP growth, controlled inflation, manageable fiscal deficits, and record-high foreign exchange reserves.

Additionally, the report also highlighted that the Indian rupee has demonstrated resilience in the face of recent foreign institutional investor outflows of USD 12 billion, showcasing the country's economic strength.

"Despite the intense FII outflows of USD approx. 12bn within a very short time span, the INR has shown resilience compared to past such incidences, indicating India's strong macroeconomic fundamentals robust GDP growth, controlled inflation, managed twin deficits and record foreign reserves" said the report.

The report also highlighted a positive shift in household savings, with increasing allocations toward equities as an asset class. With a large and diverse economy, India remains a key player in global equity markets.

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