NIFTY Drawdowns: The Fall Is Only Half the Story

Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
— Peter Lynch [7]

Everybody wants to buy the market when it is cheap. At least, that's what we say when it is going up.

When prices actually fall, the conversation changes. We may understand why markets fluctuate, but that doesn't mean we have the stomach to watch our own money fall with them. The investment you were happy to buy at a higher price starts looking questionable. There are reasons for the fall, people explaining why it could get worse, and a portfolio that is becoming increasingly unpleasant to open.

We are seeing that conversation again. As of its October 16, 2026 close, the NIFTY was approximately 12.1% below its January 2 closing peak. On October 5, Mint published a discussion about whether SIP investors should change their strategy after an eight-week losing streak. Meanwhile, AMFI reported ₹32,490 crore in mutual-fund SIP contributions for September, against ₹32,297 crore in August. People discussing whether to stop and money continuing to come in can both be true. [1][2][4]

There are also real economic concerns behind the headlines. In its September market wrap, brokerage PL Capital discussed the NIFTY's decline alongside rising Brent crude and foreign institutional selling. These are relevant concerns, particularly for an oil-importing country like India. But knowing the concerns does not tell us the date on which prices will stop falling. [3]

So, should you continue investing? Buy more? Or wait for things to settle down?

Before answering that, I want to look at a part of market falls that gets much less attention. We spend a lot of time asking how much we could lose. We spend far less time asking how long we can leave the money alone.

What is a drawdown anyway?

A drawdown is the fall from a previous peak. If an investment rises to ₹100 and subsequently falls to ₹80, it has suffered a 20% drawdown. To get from ₹80 back to ₹100, it needs to rise 25%. The starting amount has changed, which is why the recovery percentage is larger than the loss.

For this analysis, we use the NIFTY 50's daily closing price index. We follow a closing peak down to the lowest subsequent close before the index first regains that peak. These figures exclude reinvested dividends; they are not the returns of a mutual fund or an investor's portfolio. [4]

There are three parts to that journey: the time from the peak to the trough, the time from the trough back to the old peak, and the total time spent below that peak. That last period is often called the time underwater.

The distinction matters. If someone says a market “recovered in eight months”, did those eight months start when it began falling, or when it finally stopped? For an investor who bought near the high, the experience includes both.

And the trough itself is only obvious afterwards. At the time, it is just another difficult day when nobody can promise that tomorrow won't be worse.

Does a bigger fall mean a longer wait?

No matter how great the talent or effort, some things just take time…
— Warren Buffett [8]

The difficulty is knowing how much time to allow. It would be convenient if the relationship were straightforward. A small fall takes a little patience, a big fall takes more, and we can plan accordingly.

The NIFTY's history does not fit that neatly.

Selected NIFTY 50 price-index episodes, calculated from daily closes. Durations are calendar days from peak to first recovery, not trading sessions. These examples illustrate different paths; they are not a count of every historical correction. [4]

The COVID fall was much deeper than the fall beginning in March 2015. Yet the earlier episode left the index below its old closing high for more than twice as long.

In 2015, the descent itself took 359 days. After the trough, regaining the old peak took another 383 days. During COVID, those periods were 69 days and 231 days respectively. The frightening fall and the frustrating wait are different things. [4]

That is easy to miss when looking back at a chart with all the dates already filled in. We know where the line eventually went. The person living through it did not.

Imagine having ₹10 lakh invested, seeing it fall, and checking a year later to find that it still hasn't regained its earlier value. Then imagine needing some of that money for a house payment or your child's education. The market does not know about either of those dates.

We are used to planning around a Fixed Deposit's maturity date. With equity, there is no date printed on the investment telling us when it will regain its old value. If we need the money on a particular day, we cannot ask the market to arrange its recovery accordingly. The question becomes whether our finances allow us to wait, rather than whether we can persuade ourselves to be patient.

But wasn't 2020 a good year for the market?

By the end of the year, yes. The NIFTY price index finished 2020 approximately 14.9% above its final close of 2019. Within that same calendar year, it had suffered a 38.44% drawdown from its January closing peak. Both statements are correct. [4]

Someone looking only at annual returns sees a positive year. Someone who was invested in March remembers a very different experience.

This is why a return table cannot tell the entire story of owning an investment. It tells us where the journey ended relative to where it began. It does not tell us what we had to sit through along the way, or whether we needed to withdraw money at an inconvenient point.

Nor should we assume that another sharp fall will follow the COVID recovery timetable. Those 300 days describe one completed episode. They are not a deadline the next correction has to respect.

In my earlier article on equities, I wrote that volatility is the price we pay for higher potential returns. Looking at drawdowns makes that price more tangible: there can be a large fall, a long wait, or both.

Does a SIP solve the problem?

Slow and steady wins the race.
— Common saying

That is the appeal of a SIP: a steady process through uncertain markets. You invest at different prices, and the same monthly amount buys more units when prices fall. But steady investing doesn't mean beating an FD every time we check.

Take ₹10,000 invested monthly from January 2022. By 16 October 2026, the ₹5.80 lakh contributed would be worth about ₹6.58 lakh in a dividend-inclusive NIFTY SIP model, an annualised return of 5.3%. The same monthly deposits growing at an illustrative 7% a year would be worth ₹6.86 lakh. The FD benchmark is ahead. [6]

But this is not true of every post-COVID start. An April 2020 start still shows about 8.9% annualised in this model; January 2024 shows about −1.3%. The starting date matters. [6]

So, does the January 2022 investor need a new market high just to catch up? In this snapshot, matching the 7% benchmark needs a NIFTY level of about 24,130, only 4.3% above 23,146. Near 26,000, the SIP's annualised return would be about 10.1%. Reaching 12% would need roughly 27,160, above the previous closing peak of about 26,329. Different start dates have different hurdles. [6]

These are immediate revaluation calculations, not future targets: no time passes and no new money is added. If the recovery takes longer, the FD keeps earning and the hurdle changes. The model uses first-trading-day monthly contributions, reinvested dividends and a constant assumed 7% deposit rate, before fees and tax. [6]

That is why I wouldn't dismiss the SIP because it trails an FD today. You have accumulated units throughout the journey; those units participate when prices recover. In this example, catching the FD does not require the NIFTY to regain its old high. The SIP helped you keep investing while the outcome was uncertain. Whether that ultimately produces a better return still depends on what follows. We'll explore that comparison properly in a separate article.

You still need the cash flow and time to continue. A SIP is not an obligation if your income or cash needs have changed.

I wouldn't make that decision by counting how many other people continued investing. I would start with the purpose of the money and the time available before it is needed.

But is the NIFTY your entire portfolio?

Don’t put all your eggs in one basket.
— Common saying

We have all heard that. But diversification means more than owning several funds with different names. It means understanding what they invest in, and giving different parts of the market a considered place in the portfolio from the start.

Look at what happened to ₹1 lakh invested on 3 January 2022 and held until 16 October 2026. In the dividend-inclusive NIFTY 50, it grew to about ₹1.39 lakh, a cumulative return of 39.1%. The same amount in the NIFTY Midcap 150 grew to ₹1.92 lakh, and in the NIFTY Smallcap 250 to ₹1.83 lakh: returns of 92.3% and 83.1% respectively. These are lump-sum index comparisons, not the SIP calculation above. The NIFTY was only one part of the market. [11]

That is why I wouldn't judge an entire mutual-fund portfolio by one headline index. Someone holding a suitable mix across market segments could have experienced a different journey, even while the NIFTY's progress felt disappointing.

Fund selection matters too. Take a small cap fund which we have been recommending for the last 3 years. Over that same January 2022–October 2026 period, ₹1 lakh in its Regular Growth plan became ₹2.22 lakh, a cumulative return of 121.6%, against ₹1.83 lakh in the Smallcap 250. [11][12]

And this wasn't only a small-cap fund beating a large-cap index. Its published three-year figures ending 27 February 2026 show 29.93% a year, against 20.15% for its own BSE 250 SmallCap TRI benchmark. That is a separate, earlier comparison; both returns use the same period. [12]

This is where an expert fund management team can make a difference. We get the benefit of their research, selection and decisions within that part of the market. This fund delivered considerably more than its benchmark in that period; that doesn't promise the same result every time.

Nor did these segments escape the recent weakness. From 26 September 2024 to 16 October 2026, the dividend-inclusive NIFTY 50 fell about 9.6%, versus 1.7% for the Midcap 150 and 3.2% for the Smallcap 250. They held up differently; they weren't all moving upwards. Smaller-company funds can also suffer sharper falls, which is why their place in a portfolio needs to suit the investor. [11]

The answer isn't to pull out all our investments because the NIFTY has fallen. Nor is it to move everything into whichever fund has just performed best. It is to build the diversification beforehand, choose funds with care, and give that allocation time to work. Prices in parts of the market are more modest than at the September 2024 peak; that can improve the starting point for future contributions, without telling us where the bottom is. A lower NIFTY needn't mean abandoning the plan, because the plan can own much more than the NIFTY. [11]

So, what should we prepare for?

You Can’t Predict. You Can Prepare.
— Howard Marks [10]

And that is the part we can actually do something about. We cannot set the recovery date, but we can decide how much of our money depends on it.

First, separate money with a near-term use from money that can remain invested for longer. Emergency expenses and approaching goals should not depend on an equity market recovering on schedule. The appropriate mix of assets depends on those needs, along with the risks of the assets themselves.

Second, look at the effect of a fall on the whole portfolio. It is easier to say “I can tolerate a 30% fall” than to calculate what that would mean in rupees and decide whether it would force a change in your plans. That calculation is more useful before the market gives you a reason to do it in a hurry.

Third, decide how contributions and rebalancing fit your intended allocation. Adding money because equity exposure has fallen below a considered allocation is a different decision from adding because a headline says the bottom is near. Staggering investments can spread entry dates; it cannot guarantee a better outcome or remove the possibility of further losses.

The historical episodes help us understand the range of experiences investors have faced. They cannot tell us how deep the next fall will be, when it will end, or whether an individual investment will recover.

If you want to keep investing through a difficult market, the rest of your finances need to make that possible. A suitable SIP can help you keep accumulating through that wait, rather than making every contribution depend on a reassuring headline. When the money has a purpose and a date attached to it, the time spent waiting deserves as much attention as the percentage lost.

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Data and attribution: The idea of examining NIFTY drawdowns was prompted by Inves21's NIFTY drawdown analysis. The calculations here were independently reproduced from daily NIFTY 50 closing price-index observations obtained through Yahoo Finance, with the series refreshed through 16 October 2026. These are secondary-source observations, not a direct NSE data download. The table uses complete selected episodes between 2015 and 2022; no historical frequency or future recovery probability is inferred. First recovery means the first close at or above the previous closing peak, rather than a sustained breakout. Annual return compares the final trading close of 2019 with the final trading close of 2020. The current 2026 drawdown remains open: its eventual trough and recovery date are unknown. Current context was checked on 17 October 2026.

References

[1] AMFI — Mutual Fund SIP contributions. September and August 2026 gross contributions.

[2] Mint — NIFTY has fallen for eight straight weeks: how should SIP investors rethink their strategy?, 5 October 2026. Cited for the contemporary investor discussion, not a forecast or a claim about subsequent weeks.

[3] PL Capital — September 2026 market wrap. Brokerage commentary on the market backdrop; the events discussed do not establish a single cause for market moves.

[4] Yahoo Finance — NIFTY 50 historical prices. Independently calculated from the project's stored daily-close series. Download the underlying daily closes (CSV) and calculation notes.

[5] NSE Indices — Total Return Index. Explains the reinvestment of dividends in total-return indices.

[6] NSE Indices — Historical data, NIFTY 50 Total Returns Index, including reinvested dividends, through 16 October 2026. The SIP comparison uses this series rather than the price index used in the drawdown charts. Download the SIP/FD calculations or read the cash-flow assumptions and methodology. The 7% deposit rate is an illustrative assumption, not a historical bank-rate claim.

[7] Fidelity — Knowledge Centre, p. 26. Peter Lynch on the difference between understanding investing and tolerating its experience.

[8] Berkshire Hathaway — 1985 shareholder letter. Warren Buffett on the time some outcomes require; the quotation is an excerpt.

[10] Howard Marks — You Can’t Predict. You Can Prepare., 20 November 2001. The memo's footnote credits its title to MassMutual advertising.

[11] NSE Indices — Historical data. NIFTY 50, NIFTY Midcap 150 and NIFTY Smallcap 250 total-return indices, compared over identical dates. Returns are cumulative and include reinvested dividends; they are not SIP returns or investable fund returns after expenses.

[12] AMFI — Net Asset Value. The anonymous fund example uses historical Regular Growth NAVs, after the plan's expenses and before investor tax or exit loads. See the diversification calculation methodology for dates, return definitions and the same-category index comparison; the NIFTY Smallcap 250 is a same-category comparator. The separate three-year annualised comparison ending 27 February 2026 uses the fund issuer's published Regular Growth performance table and its designated BSE 250 SmallCap TRI benchmark; it is not an October 2026 comparison.

Disclaimer

I am a Mutual Fund Distributor. There is an inherent conflict of interest here.

But we also practice what we preach. More than 90% of our wealth is in Mutual Funds. We follow the markets daily, but we don't trade regularly. We hold both Mutual Funds and stocks for years without selling because we know the power of compounding.