Stories
India Market Correction Nears Reversal After Long Underperformance
- •India's prolonged market correction may be approaching a turning point following a sharp period of underperformance against emerging markets, according to the DSP Mutual Fund October Netra report.
- •The Nifty experienced a classic time correction, spending 145 consecutive trading days below its 200-day moving average while limiting the maximum price decline to just 11.5 percent.
- •A 53.9 percentage-point performance gap between the Nifty and the MSCI Emerging Markets index since July 2025 has created a rare divergence favoring a potential market reversal.
- •Large-cap stocks have emerged as more attractive investments with the Nifty 50 trailing P/E ratio dropping to 19.26x, which is below its historical median of 20.9x.
- •Traditional defensive sectors such as IT, private banks, and staples are now trading at forward valuations comparable to cyclicals, losing their historical premium.
Key Questions Answered
The Nifty spent an extended stretch of 145 consecutive trading days below its 200-day moving average, yet the maximum price decline was only 11.5 percent. Instead of a deep price collapse, the market underwent a prolonged period of consolidation where underlying fundamentals, earnings, dividends, and book values gradually caught up.
Between July 2025 and September 2026, the MSCI Emerging Markets index gained 39.3 percent in US dollar terms while the Nifty declined 14.6 percent, creating a substantial 53.9 percentage-point gap in returns.
Large caps have emerged as more attractive since the Nifty 50 trades closer to historical norms with a trailing P/E ratio of 19.26x and a P/B ratio of 2.75x, whereas mid- and small-cap valuations remain elevated. At the sector level, IT, private banks, and staples now trade at forward valuations comparable to cyclicals, losing their previous historical premium.
