Equities over last one year: a case of time correction

We are all used to the concept of price correction, which is the price of a stock or index correcting downward, say by 10% in a relatively short span of time or by 30% in some time. In this context, ‘correction’ means the price had moved up more than justified or moved up too fast, hence the market corrected it downwards.

Time correction is the price of a stock / index lagging in a narrow zone for a long period of time. It is a ‘correction’ as though the price is not falling significantly, investors are not getting any decent return over a long phase. To look at it from a different perspective, though the market is not correcting the price by bringing it down big time, there is no reward for investors for that much extent of time, who are facing a ‘correction’ in terms of time or opportunity to invest in another stock or a bank deposit that would have fetched better returns during the period. This phenomenon can be seen at play in any investment asset.

Psychologically, we are aware of price correction but we have to be mentally prepared for time correction as well. This gives a sense of the investment horizon required. Depending on the market cycle — the bull-bear cycle may be relatively short or long but when the tide turns, there is recovery in stock / index. Time correction tests our patience. When the price of a stock we are holding is languishing, we can wait for so long but beyond a point we are tempted to move away from it.

Earlier instances

BSE Sensex has a 45-year history. When we look at 10-year holding periods over the life of Sensex, it has given decent returns. However, there is one exception. From March 1992 (Sensex at 4,285) to March 2002 (Sensex at 3,469) return was negative. This is to illustrate time correction. On the other side, from March 1982 (Sensex at 218) to March 1992 (Sensex at 4,285), return was 35% a year on a low base i.e. 218.

NSE Nifty50 has never given negative return over a 10-year holding period. However, there have been phases of stagnation. In January 2008, it touched 6,274. Till December 2013, till it regained the level, investors did not get any return.

Gold, historically, has had very long phases of time correction. Tracking gold price in USD per Oz, there is a long period of almost 27 years of time correction. Gold price, from $760/Oz in January 1980, took time till October 2007 to get back to that level. Gold price in INR would be different as it benefits from INR depreciation.

Current situation

Over the last one year, equity returns, at least at the index level, has stagnated. As on August 30, 2024, NSE Nifty50 was at 25,236. On August 29, 2025, it was at 24,427. Return has been negative. BSE Sensex was at 82,366 as on August 30, 2024. As on August 29, 2025, it was at 79,810. This also shows negative returns over last one year. There is concern among investors on the opportunity loss as even bank deposits would have fetched better returns. Having said that, this is only a time correction, there have been much worse phases of price correction earlier. On investor psyche, time correction is relatively easier to bear. History shows simply by virtue of holding on, you earn decent returns over an adequate time horizon. The market is bound to bounce back.

There are many reasons for the current time correction. Historically, the major driver of equity market growth has been growth in firms’ earnings per share. This indicates for the price paid by investors, how much the firm is earning incrementally. In 2024-25, the EPS growth rate over previous year was muted. In 2025-26 and next year, as per projections, EPS growth rate would bounce back. Foreign Portfolio Investors (FPIs) have been selling equities in India for quite some time as there have been concerns on valuation in terms of price-earnings (P/E) multiple. Incremental demand from local investors is supporting the market. Since valuations had become stretched, this minor correction over last one year has actually been healthy.

Conclusion

The fundamental structure of economy and corporate growth remains very much in place. There are new investors joining the fold, with rising disposable income, more awareness on financial markets via Internet and accessibility of modes of investment e.g. mutualfunds and broking apps. As an investor you have to be clear on path, time horizon and stay the course. It is always advisable to go for a judicious allocation in portfolio to various investment assets so that bad phases in one are balanced out by the other.

(The author is a corporate trainer (financial markets) and author.)