The global backdrop has been unusually crowded with cross-currents. Geopolitical unrest, sticky inflation in several pockets, erratic commodity cycles and elongated interest-rate cycles dominate investor minds. Tariff policy is once again reshaping global trade flows, with second-order effects on Indian exporters and supply-chain beneficiaries.

Artificial intelligence (AI)-driven concentration has pushed the US and some emerging-market indices (like Taiwan’s and South Korea’s) to multi-decade highs, with only a handful of mega-caps driving a disproportionate share of returns.

Crude oil is a structural variable for India, with every $10 move in its price materially impacting our import bill, the rupee and inflation expectations.

Markets in recent times have tested the nerves of even the most seasoned investors. Whether volatility will persist is no longer a question. The challenge is how to deal with it without sacrificing long-term returns. ‘The investor who survives eventually thrives’ is a saying that has proven true in recent times.

While volatility in itself is not a threat, panic-driven actions during volatile times are. Long-term wealth is created not merely by a perfect forecast, but by a resilient portfolio and the discipline of rebalancing it even when every instinct screams otherwise.

Portfolio resilience is often misconstrued as just going back to safe-haven assets or sitting on piles of cash in volatile times. However, true portfolio resilience entails building a portfolio that can absorb shocks without requiring the investor to make urgent, reactive decisions under stress. By genuinely diversifying and spreading risk across asset classes that behave differently across macroeconomic environments, one can build a portfolio that can see off tumultuous times.

We believe a barbell construction is the right answer for this environment.

On one hand, Indian investors can maintain exposure to high-quality growth themes and consider domestic growth allocations across capital expenditure, manufacturing and financialization themes that are structurally tied to India’s decadal story. These assets capture the structural shifts that will define the next decade.

On the other hand, they can build an income-and-stability sleeve through high-quality Indian debt funds and real estate investment trusts (REITs) as well as infrastructure investment trusts (InvITs) and high-dividend-yield equity strategies.

We have been emphasizing a few principles to our clients:

First, rebalance with intent, not emotion. Drawdowns are when allocation discipline matters the most. Rebalancing is among the least glamorous disciplines in investing. It involves selling what has done well and buying what has not. In a bull run, it feels like leaving money on the table. In a correction, it could feel like catching a falling knife. Neither feeling is accurate.

Second, recognize that the worst returns and best returns in a cycle tend to cluster within months of each other. Exiting during a drawdown is the mathematical equivalent of forfeiting the recovery. And the inverse is also true. Consider what has happened over the past year-and-a-half.

Domestic small- and mid-cap equities in India ran up sharply in 2024, pulling portfolio weights well beyond intended allocations for many investors.

Those who did not rebalance found themselves, by early 2025, with concentrated equity exposures just as volatility picked up.

Third, build portfolios for resilience, not precision. No one will call the bottom, but a portfolio constructed for multiple outcomes does not need to know that. A systematically rebalanced portfolio helps trim positions that show elevated market valuations and rebuild buffers to cushion drawdowns.

It works because rebalancing is inherently contrarian. It enforces the buy-low, sell-high discipline that investors preach but rarely practise. Research has consistently shown that disciplined rebalancing, particularly during volatile times, can enhance returns—not through market timing but systematic mean-reversion across asset classes.

Optimism in a turbulent market must always be calibrated. That everything will work out fine is just a naive hope, while the case for optimism rests on a structural reading of where investment opportunities are opening up.

The next few months will test the conviction of investors. In such an environment, it is pointless trying to predict when clarity will return. It never arrives with a bell. The aim should be to ensure that one’s portfolio is positioned well to participate in a recovery without being destroyed by the drawdown.

This warrants resilience in structure, discipline in rebalancing and optimism grounded in fundamentals rather than sentiment; also, calibrated portfolio rebalancing rather than panic trades.

The investors who will look back at this tumultuous period with satisfaction will probably be those who stayed invested without looking for an exit, retained a rational approach and kept investing—systematically, deliberately and without panic.

Capital markets reward patience. They always have.

Stay diversified. Stay disciplined. And let the cycle do its work.

The author is managing director and CEO, HDFC Securities.

The global backdrop has been unusually crowded with cross-currents. Geopolitical unrest, sticky inflation in several pockets, erratic commodity cycles and elongated interest-rate cycles dominate investor minds. Tariff policy is once again reshaping global trade flows, with second-order effects on Indian exporters and supply-chain beneficiaries.

Artificial intelligence (AI)-driven concentration has pushed the US and some emerging-market indices (like Taiwan’s and South Korea’s) to multi-decade highs, with only a handful of mega-caps driving a disproportionate share of returns.

Crude oil is a structural variable for India, with every $10 move in its price materially impacting our import bill, the rupee and inflation expectations.

Markets in recent times have tested the nerves of even the most seasoned investors. Whether volatility will persist is no longer a question. The challenge is how to deal with it without sacrificing long-term returns. ‘The investor who survives eventually thrives’ is a saying that has proven true in recent times.

While volatility in itself is not a threat, panic-driven actions during volatile times are. Long-term wealth is created not merely by a perfect forecast, but by a resilient portfolio and the discipline of rebalancing it even when every instinct screams otherwise.

Portfolio resilience is often misconstrued as just going back to safe-haven assets or sitting on piles of cash in volatile times. However, true portfolio resilience entails building a portfolio that can absorb shocks without requiring the investor to make urgent, reactive decisions under stress. By genuinely diversifying and spreading risk across asset classes that behave differently across macroeconomic environments, one can build a portfolio that can see off tumultuous times.

We believe a barbell construction is the right answer for this environment.

On one hand, Indian investors can maintain exposure to high-quality growth themes and consider domestic growth allocations across capital expenditure, manufacturing and financialization themes that are structurally tied to India’s decadal story. These assets capture the structural shifts that will define the next decade.

On the other hand, they can build an income-and-stability sleeve through high-quality Indian debt funds and real estate investment trusts (REITs) as well as infrastructure investment trusts (InvITs) and high-dividend-yield equity strategies.

We have been emphasizing a few principles to our clients:

First, rebalance with intent, not emotion. Drawdowns are when allocation discipline matters the most. Rebalancing is among the least glamorous disciplines in investing. It involves selling what has done well and buying what has not. In a bull run, it feels like leaving money on the table. In a correction, it could feel like catching a falling knife. Neither feeling is accurate.

Second, recognize that the worst returns and best returns in a cycle tend to cluster within months of each other. Exiting during a drawdown is the mathematical equivalent of forfeiting the recovery. And the inverse is also true. Consider what has happened over the past year-and-a-half.

Domestic small- and mid-cap equities in India ran up sharply in 2024, pulling portfolio weights well beyond intended allocations for many investors.

Those who did not rebalance found themselves, by early 2025, with concentrated equity exposures just as volatility picked up.

Third, build portfolios for resilience, not precision. No one will call the bottom, but a portfolio constructed for multiple outcomes does not need to know that. A systematically rebalanced portfolio helps trim positions that show elevated market valuations and rebuild buffers to cushion drawdowns.

It works because rebalancing is inherently contrarian. It enforces the buy-low, sell-high discipline that investors preach but rarely practise. Research has consistently shown that disciplined rebalancing, particularly during volatile times, can enhance returns—not through market timing but systematic mean-reversion across asset classes.

Optimism in a turbulent market must always be calibrated. That everything will work out fine is just a naive hope, while the case for optimism rests on a structural reading of where investment opportunities are opening up.

The next few months will test the conviction of investors. In such an environment, it is pointless trying to predict when clarity will return. It never arrives with a bell. The aim should be to ensure that one’s portfolio is positioned well to participate in a recovery without being destroyed by the drawdown.

This warrants resilience in structure, discipline in rebalancing and optimism grounded in fundamentals rather than sentiment; also, calibrated portfolio rebalancing rather than panic trades.

The investors who will look back at this tumultuous period with satisfaction will probably be those who stayed invested without looking for an exit, retained a rational approach and kept investing—systematically, deliberately and without panic.

Capital markets reward patience. They always have.

Stay diversified. Stay disciplined. And let the cycle do its work.

The author is managing director and CEO, HDFC Securities.