MARKET TIMING -BLACK SWAN TIME OF INDIA

Should you hold cash or invest now? What should you do with your current investments?  Should you look for investing in midcap and small caps now? These are the biggest questions in the mind of an investor under the current circumstances. In my 20 years of experience in financial planning and advisory, these events are Black Swan events.

As an investor, the returns from investing are often treated as timing the market. Every investor whom I have met in the last twenty years of my career has always believed that they can time the market to maximise returns.  In the last 5 years, post-COVID Indian markets have converted all clients into a fund manager, where a financial advisor stood helpless.

The Indian markets have witnessed a phenomenal fall in the last 6 months, ranging from Sept 2024 to February 2025. By January 13, 2025, the Nifty 50 had fallen by 12.29% from its all-time high in September 2024. By March 4, 2025, the decline was reported at 16%. A post on March 13, 2025, indicates the Sensex (a related large-cap index) was down 13.6% from its September 2024 high.

On January 13, 2025, the Nifty Midcap was down 14.08% from its September 2024 peak. By March 4, 2025, the decline had deepened to 21%. A post on March 13, 2025, notes that the BSE Midcap (a comparable midcap index) was down 21.4%, aligning closely with the Nifty Midcap’s reported fall. Given the consistency of these figures, the Nifty Midcap 100 likely fell by approximately 21% by March 15, 2025.

On January 13, 2025, the Nifty Smallcap was down 14.14% from its September 2024 high. By March 4, 2025, the decline was reported at 25%.

Hence, the market has corrected well, and its overvalued valuations have come down significantly. This was the 1^st opportunity where an investor who has timed the market and has deployed funds for investing.

The trade war, which is an Act of Trump, has rattled the global markets and Indian markets too, where uncertainty still prevails. But the most surprising part is that  FPI inflows dried down during the last 6 months from September 2024 to February 2025, but the same FPI started their inflows back into Indian markets. Foreign Portfolio Investors infused ₹26,042 crore into Indian equities from March 16 to March 31, with significant investments in banking and financial services (₹17,585 crore).

Trade war amplified FPI’s outflow, which created an opportunity for investing FPIS’ to sell equities worth nearly ₹35,000 crore between 1^st April to 11^th April 2025, reflecting caution due to anticipated US tariff policies.

 As the dust settled on the trade war, the FPI came back roaring. By April 25, FIIS had injected nearly ₹30,000 crore over 10 days, driven by optimism around India’s growth and easing global tensions. In May till now, around 5000cr have been deployed by FPI in Indian markets. Did we, as investors, take advantage of investing when the markets gave us such a huge opportunity to time the market?

The current India-Pakistan war is also an opportunity for investing, where uncertainty on war creates a wealth creation opportunity. A financial plan aligns black swan events with long-term goals, turning crises into opportunities for generational wealth through compounding. SIPS started at 2008 lows and delivered a 15% CAGR by 2018. Post-COVID SIPS (2020) yielded 20%+ CAGR by 2025.

If we look in past, we find that during May–July 1999, a limited conflict in Kargil, Jammu and Kashmir, occurred after Pakistani incursions. India regained territory by July 26, 1999, and the market tanked 15% from its May 1999 high (1,400) to a low of 1,190 by June 1999. The Sensex dropped 13–16% (from 4,800 to 4,000). Post-victory (July 26), the Nifty rallied ≈20% by October 1999 (to 1,430), and the Sensex gained 25% (to ≈5,000). The 3-month recovery averaged 23%, with 6-month gains of 30–35%, fueled by the global tech boom and restored investor confidence.

The concept of timing the market is like a black swan event type, and such events don’t happen so frequently as compared to the current last 6 months' events. Black swan events—rare, unexpected occurrences with significant consequences (e.g., wars, financial crises, pandemics)—often trigger market volatility but also create unique investment opportunities for those prepared to act strategically

As an investor, one should take advantage of these black swan events for long-term wealth creation. These black swan events help to reach financial goals much faster as compared to the timeline planned under normal market returns.

Black swan events often trigger panic selling, pushing fundamentally strong stocks to attractive valuations.  Black swan events prompt government interventions (e.g., stimulus, rate cuts) and shift capital to undervalued sectors, creating alpha opportunities.

Historically black swan events are the best opportunity for financial planning. The Kargil War (1999) saw a 15% Nifty drop, recovering 23% in 3 months. The 2008 crisis caused a 52% Nifty crash, with a 75% rebound in 2009. The 2020 COVID-19 crash led to a 29% decline, followed by a 50% recovery.

 The Nifty’s current forward P/E (19.6x vs. 22x historical average) signals undervaluation. Sectors like defence, healthcare, and consumer staples often outperform during geopolitical or economic crises due to inelastic demand or government spending. Black swan events create generational buying opportunities for long-term investors, as markets historically recover strongly (23–75% gains post-crisis). As an investor, one should take advantage of these events. The financial planning is well created under such events.  Don’t forget that any De-escalation (e.g., ceasefire) could spark a 5–10% rally in your portfolio. Stay invested and allocate more to equities. Look for mid-cap and small-cap funds and equities where P/E and PEG ratios are attractive. Invest in a staggered way and keep inflows every day or weekly. Keep all current investments intact. Exit non-performing funds and equities and invest in those sectors and funds where your risk profile and goal planning are aligned. Further invest in black swan-driven opportunities in sectors.

Build faith and confidence among the new age investors, and most importantly, be connected with all clients since communication in these times helps to create wealth and relationships.