Recently there has been a good rise in the stock market. The special thing is that this rise has come after a big decline of four months. If we look at the historical data, this is a sign of a big potential rally. According to DSP Mutual Fund data, Nifty 50 ended its four-month decline in March 2026. This decline has happened only seven times in the entire monthly history of the index.
What happens next has historically been quite dramatic. In six complete cases of decline lasting more than four months, the index returned an average of 40.7 percent over the next year. The average profit of one year was slightly less, i.e. 20.8 percent, but this also indicates a huge growth. In three months, the average return was 12.2 per cent, which increased to 22.4 per cent in six months.
Going forward, in a few quarters, this could prove to be the biggest buying opportunity since Covid, Quant Mutual Fund said in its latest note, and urged investors to rapidly rebalance their portfolios. The rarity of this decline shows how unusual the recent selloff has been.
Of the 105 separate negative drawdowns in Nifty’s history, more than half lasted just a month. Only seven times did the decline last for four months or more. The longest decline lasted eight months from September 1994 to April 1995.
Smart Money Is Already Investing in Stocks
The selloff that was going on in the market – with the Nifty falling 14.8 per cent in four months – seems to have reached its lowest level. ICICI Prudential’s Balanced Advantage Fund—the second-largest fund in its category with assets of Rs 71,150 crore—has increased its exposure to equities to 61.9 per cent as of March 31; This is the highest level in the last five years.
ED and CIO of ICICI Prudential AMC, S. Naren said in the ET report that the signals related to our valuation and market sentiment are now looking better. Therefore, we believe this is a right time for investors to gradually increase their investment in equities.
Earlier, this fund had invested maximum in equity (67.7%) in June 2020. At that time, the market was just coming out of the period of selling caused by Covid, after which a tremendous rise was seen in the market.
What is the pattern here?
- DSP’s data shows a clear pattern that the longer the decline, the stronger the recovery. While a continuous decline of one month gave an average one-year return of 22.4 per cent, a decline of more than four months gave returns of almost double, i.e. 40.7 per cent.
- Historical events present a picture of opportunity. After a four-month decline that ended in January 1991, the Nifty rose 117.9 percent the next year.
- The trough that ended in August 1998 resulted in a one-year gain of 65.6 percent. Even the most recent similar event, which ended in February 2025, also delivered an annualized return of 13.8 percent.
- Not all recoveries were immediate. In the case of August 1998, there was a modest gain of only 10.4% in six months, which increased to 65.6% by the end of the year; This shows that it is very important to have patience.
Why the best option?
Quant Mutual Fund said it “sees signs of capitulation in Indian equities,” which “actually means the worst is behind us.” The fund said that at the lowest point of the cycle, volatility increases, investors’ risk appetite decreases and there is more focus on short-term gains. Such a sudden change in volatility reflects a change in market structure, which is an opportunity to take advantage rather than lose.
With nominal GDP growing twice as fast as China’s, the fund argues that Indian equities remain an excellent investment option across the globe. It expects that “the improvement in the earnings cycle, driven by recent reforms, will trigger the next phase of market rally. The fund believes that investors around the world are underestimating the trade deal between India and the US, which will definitely benefit them in the long term.
Despite recent geopolitical shocks and a sharp rise in crude oil prices, Quant expects that combined action by the government and regulatory bodies will strengthen the RBI’s decision to maintain low policy rates for a longer period. The fund further said that our view that the earnings cycle had reached its lowest level in the September quarter now seems to be proven correct. There will be a gradual improvement in corporate earnings.
portfolio changes
Quant’s new portfolio reflects this attitude of taking advantage of this opportunity. It has increased investments from last month’s high cash levels, and has taken advantage of attractive valuations. The fund is mostly tilted towards large cap stocks, which have good overall liquidity. Besides, investment in some selected mid and small cap stocks has also been increased. For investors tracking Nifty, the lesson of history is clear: there have been few consecutive periods of decline, but whenever they have happened, they have always been followed by strong recoveries. Whether we get an average return of 40.7 percent, or the returns are closer to the median of 20.8 percent, the current situation indicates that perhaps the worst is over.