The stoic Sensex won again in 2025 —a rare period of calm amid tariff, geopolitical storm

This performance is not a rarity, though. Over the last three decades, only eight years, including 2025, have seen an intra-year decline of 10% or less in the Sensex.

This suggests that equity markets tend to overlook shock-inducing events, such as tariff wars or geopolitical flare-ups, unless the disruption evolves into a full-blown systemic crisis or a global pandemic.

Experts see this as evidence of a structural shift, where the growing depth of domestic capital is increasingly insulating Indian markets from external volatility.

India’s shallow drawdown reflects a rare balance in market microstructure, where steady domestic SIP inflows are being absorbed by fresh paper supply through IPOs, QIPs and promoter exits, preventing sharp moves in either direction, notes Harsh Gupta Madhusudan, fund manager of Ionic Asset's PIPE Fund.

“With FPIs trimming secondary exposure while domestic money keeps coming in, the market has effectively been range-bound rather than fragile," he adds.

While drawdowns are a market certainty, they serve as a necessary reminder that investors must often endure mid-way pain to achieve impressive returns.

According to a Mint analysis, the Sensex has seen an average intra-year decline of nearly 20% over the past 30 years. Tracing these instances reveals a fairly even split across three levels of volatility: eight years saw dips of 10% or less, 11 years experienced turbulence between 10% and 20%, and the remaining 11 years saw declines exceeding 20%.

Essentially, enjoying a ‘green’ year almost always requires surviving a ‘red’ month. The data further reveals that when declines are contained within the 20% threshold—which occurred in 19 of the last 30 years—there were only two instances where annual returns actually turned negative.

Does this make ‘buying the dip’ the ideal default strategy? Rajesh Palviya, senior VP of research at Axis Securities, suggests it does: “Historically, corrections of up to 20% have tended to represent time or valuation adjustments rather than structural damage," he said.

“From a technical standpoint, these drawdowns usually preserve long-term trend supports, making them opportunities for accumulation rather than signals to exit."

However, the probability of a year ending in the red increases drastically once a drawdown exceeds 35%, as seen during the crises of 2001, 2008, or 2020.

Historically, market outcomes have correlated closely with the severity of these dips; years with drawdowns under 20% typically avoid a negative year-end finish, while deeper declines, ranging from 20% to 60%, result in annual losses roughly 45% of the time.

According to Palviya, the 30–35% mark is a critical tipping point. Once markets correct to these levels, key long-term supports tend to break, signalling deeper liquidation and loss of confidence rather than routine profit-taking, he explained.

These episodes typically unfold over multiple quarters and require earnings and macro stability to recover, which is why year-end outcomes often turn negative, he added.

Despite these turbulent mid-year swings, the Sensex has shown resilience, finishing in the green in 23 out of the last 30 years. This year, markets followed the historical script perfectly, weathering a 9% drawdown to deliver an impressive 8% gain. But is this subdued volatility sustainable?

“While the last 12–18 months do resemble a low-volatility phase, this is less a permanent regime shift and more a function of a structural buyer and seller offsetting each other," notes Gupta of Ionic Wealth. A meaningful return of foreign flows could quickly normalise volatility, even if India continues to remain calmer than global peers, he adds.