If your equity portfolio is hurting this quarter, you’re not alone.
Indian equities have had a bruising start to 2026. As of 31 March, the Nifty 50 is down 14.5% year-to-date, the Nifty 500 about 14%, and mid- and small-cap indices have fallen 13-14% in just three months. By any short-term measure, this has been a sharp correction.
Step back, though, and the picture looks very different. The Nifty 50 is still up 52%. The Nifty Midcap 100 has gained 118%, and the Smallcap 100 about 88%. A ₹10 lakh investment in midcaps five years ago would be worth roughly ₹21.8 lakh today, even after the recent fall. The current drawdown is painful, but it hasn’t erased wealth; it has compressed valuations.
The nature of the decline also matters. Over a single week, major indices fell within a narrow 2.1-2.7% band; over a month, losses ranged from 10.3% to 13.5%. When everything moves in lockstep, it usually isn’t about stock picking. This is macro, global risk-off sentiment, sustained foreign institutional selling, and a broad repricing of growth expectations. There was little place to hide.
The currency effect
That longer lens also reframes the global picture. On a one-year view, global markets still look stronger in local currency terms: Japan’s Nikkei 225 is up 43.1%, the FTSE 100 17.8%, and the S&P 500 16.3%. India, by comparison, appears to lag. But that snapshot misses the turn now underway. In March alone, the Nikkei fell 13.2%, the S&P 500 dropped 5.1%, and the FTSE declined 5.6%. India’s correction began earlier; global markets are only now catching up.
Over five years, India still leads. The Midcap 100’s 118% return outpaces the Nikkei (75%), the S&P 500 (64%), and the FTSE (51%). By that measure, Indian mid- and small-caps have been among the best-performing equity segments globally.
What often gets overlooked in these comparisons is currency. Indian investors earn in rupees, not dollars or yen. Over the past five years, the rupee has depreciated 27.8% against the dollar, or about 5% annually. That materially lifts overseas returns. The S&P 500’s 64% gain in dollar terms translates to roughly 110% in rupees, with currency alone adding about 46 percentage points. The FTSE shows a similar effect, rising from 51% to about 85% in rupee terms.
Japan is the exception. The rupee has strengthened about 10.6% against the yen over this period, reducing the Nikkei’s 75% return to roughly 56% for an Indian investor. Currency, in this case, has been a drag.
Three takeaways
First, this looks like a valuation reset, not a structural break. The underlying drivers—domestic demand, earnings growth, and relatively healthy balance sheets—remain intact. What’s correcting is the premium.
Second, the case for global diversification is stronger than it appears at first glance. A steadily weakening rupee means dollar assets carry a built-in currency tailwind. Allocating a portion of a portfolio to US equities is not just diversification, it is a hedge.
Third, time horizon matters more than timing. The most exposed investors today are those who entered mid- and small-caps recently with short horizons and no long-term anchor.
Markets almosy always turn. India led from 2021 to 2024; it is under pressure now. The advantage lies not in predicting those turns, but in being positioned across market caps, geographies, and currencies when they happen.
Lovaii Navlakhi is managing director and chief executive at International Money Matters Pvt. Ltd