Why the Last Year Was Flat — And Why the Next Few Years Could Look Very Different
Over the last one year plus, the markets have remained unusually flat and quiet. Most asset classes have delivered either negative or single-digit returns, with the notable exception of commodities. This subdued behaviour is not due to any structural weakness in the economy, but largely because of heightened global uncertainty — unpredictable statements from the US leadership, geopolitical tensions, wars, and general instability across regions.
When global sentiment is unclear, markets typically move sideways. That’s exactly what we’ve witnessed. But importantly, there is nothing fundamentally wrong with India’s economic setup. Earnings remain stable, credit markets are healthy, and there are no signs of deep stress. This is why the coming two years could look significantly better than the last. Equity investing has always been a 3–5 year journey, not something to judge by a single year of dullness.
Index Has Risen — But the Rally Is Extremely Narrow
The Nifty index has climbed close to its previous highs, but this gives a misleading impression of broad strength. The index reflects only 50 companies, while mutual funds typically invest across the top 500. And even within the Nifty 50, only a handful of heavyweights have driven most of the recent gains.
The data reinforces this clearly:
Top 6 stocks (like RIL, HDFC Bank, Bharti Airtel, SBI, L&T, Axis Bank) contributed +930 points to Nifty’s rise.
Next 7 stocks added another +420 points (Infosys, Shriram Finance, HCL, TCS, M&M, ICICI Bank, Asian Paints).
The remaining 26 positive contributors added only +250 points together.
Meanwhile, 11 stocks actually declined, dragging Nifty by –125 points.
This means the bulk of the index movement came from just 13 stocks out of 50 — a classic narrow rally.
This is also why mutual fund NAVs haven’t reflected the same sharp rise:
Broad portfolios can’t outperform when only a few large-caps are running.
A Broad-Based Rally May Be Approaching
History shows that phases dominated by a few heavyweights are usually followed by a broad-based rally, where participation widens across midcaps, smallcaps, and the broader Nifty 200/500.
Right now, the only major overhang is the US tariff and policy uncertainty. Once this lifts, liquidity tends to rotate into broader sectors and mid-tier companies. This is the kind of environment in which mutual fund schemes typically outperform, because their diversified structure benefits when the rally becomes inclusive.
Why you Should Stay Patient
Flat periods like this often form the foundation for the next growth phase. They offer steady consolidation, healthier valuations, and good accumulation opportunities for long-term investors.
Given today’s backdrop:
The economy is stable.
Corporate earnings are resilient.
The rally has been narrow, not broad.
Tariff clarity could trigger the next leg upward.
Mutual funds benefit most when breadth returns.
There is no strong reason for long-term investors to lose hope. If anything, the market seems to be quietly preparing for a more balanced and stronger rally ahead.
Akshay Tiwari
Next Portfolio
AMFI Registered Mutual Fund Distributor
www.nextportfolioindia.com
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