Market Insights • December 2025
Beyond the Index: Navigating the Silent Correction
A Historical Perspective on Market Cycles and the Path Forward
If you have looked at your portfolio recently and then looked at the Nifty, you might have felt a confusing disconnect. The headline indices - the Nifty 50 and Nifty 500 - seem to be holding up well. Yet, individual portfolios across the country are seeing significantly deeper cuts.
At Amaltas, we analyzed the constituents of the Nifty Smallcap 100 and the Nifty 500. The data reveals a "Silent Bear Market" that the headline indices are masking.
"If you feel like the 'Market' is lying to you, the data suggests you are right."
The Smallcap Reality
The Nifty Smallcap 100 index is down ~13% from its 2024 peak. However, this is skewed by outliers. The average experience is a -31% crash.
What does this really mean?
"If you randomly picked 10 stocks from the Smallcap index at their peak in 2024, statistically, 5 of them would have lost more than 30% of their value by now. Only 1 out of those 10 would be in the green today."
Winners vs. Losers
Over 50% of the index (Black) is down >30%.
Index vs. Median
The 18% gap between perception (Index) and reality (Median).
A comparative graphic featuring two charts illustrating the disparity in market performance, titled 'WINNERS VS. LOSERS' and 'INDEX VS. MEDIAN'.
Chart 1 (Left): Winners vs. Losers (Donut Chart)
- Visuals: A donut chart divided into three segments showing the distribution of stock returns.
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Data Breakdown:
- Down >30%: The largest segment (Solid Black), covering 52% of the chart.
- Down 0-30%: The middle segment (Dark Grey), covering 37%.
- Positive: The smallest sliver (Light Grey), representing only 11%.
- Caption: 'Over 50% of the index (Black) is down >30%.'
Chart 2 (Right): Index vs. Median (Bar Chart)
- Visuals: A vertical bar chart comparing the headline index return against the median stock performance. Both bars extend downwards into negative territory.
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Data Breakdown:
- Index Return: A grey bar showing a decline of approximately -13%.
- Median Stock: A solid black bar showing a much steeper decline of approximately -31%.
- Caption: 'The 18% gap between perception (Index) and reality (Median).
Nifty 500: Safe Haven?
The headline Nifty 500 is down only -4% from its 2024 highs. But market breadth tells a different story: nearly 40% of companies are down 30% or more.
In Simple Terms
Even in the broader market of India's top 500 companies, nearly 2 out of every 5 companies have seen their value drop by a third or more from their 2024 peaks. The stability you see in the index is largely an illusion created by a few very large companies holding up the average.
Breadth Collapse
The Silent Correction
A comparative graphic featuring two charts titled 'BREADTH COLLAPSE' and 'THE SILENT CORRECTION', illustrating the underlying weakness in the market.
Chart 1 (Left): Breadth Collapse (Donut Chart)
- Visuals: A donut chart divided into three segments showing the distribution of stock performance.
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Data Breakdown:
- Down 0-30%: The largest segment (Dark Grey), representing 46% of stocks.
- Down >30%: The black segment, representing 39% of stocks.
- Positive: The smallest segment (Light Grey), representing 15% of stocks.
Chart 2 (Right): The Silent Correction (Bar Chart)
- Visuals: A vertical bar chart comparing the headline index return against the median stock performance. Both bars extend downwards, indicating negative returns.
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Data Breakdown:
- Index Return: A short grey bar showing a minor decline of approximately -4%.
- Median Stock: A significantly longer solid black bar showing a much steeper decline of approximately -24%, highlighting that the average stock is performing much worse than the index suggests.
Why We Track the Median
In an actively managed portfolio like ours, we do not simply track the index. We own individual businesses. When the "breadth" of the market collapses - meaning the majority of stocks fall while only a few large ones stay up - the Index number becomes misleading.
The Median Stock Return reflects the reality of the "typical" stock in the market. Currently, the median is down significantly (-31%), which explains why a diversified portfolio might seem to diverge from the index (-13%).
However, this works both ways. While this divergence hurts in the current period, the opposite occurs when breadth improves. When the broader market eventually recovers, active portfolios that hold these undervalued companies tend to outperform the index significantly.
History Rhymes: A 20-Year Perspective
Why This Matters
To understand where we are going, we must understand where we have been. We analyzed the Smallcap index over the last 20+ years because it is the market's purest gauge of "greed and fear." The data below is not a forecast, but a history lesson. It shows that market behavior - the swing from euphoria to despair - repeats with remarkable consistency. By plotting every major cycle since 2004, we can see exactly where we stand today.
Key Takeaways
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01
3 Major Upcycles
Since 2003, we've had 3 structural bull runs: 2003-2008, 2009-2020, and the current 2020 cycle.
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02
Cycle Anatomy
Each big cycle has 6 sub-cycles (3 up, 3 down). The 3rd downcycle typically brings the biggest crash (2008, 2020).
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03
Sub-Cycle Characteristics
Upcycles usually see 2.5x-3x gains over 20-30 months. Corrections are typically 30-35%, often followed by a 9-11 month "Stagnant Phase" (like 2006-07, 2013-15). We are currently in such a phase.
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04
The March Effect
Major bottoms often form in March (2007, 2009, 2016, 2020, 2023). This is driven by mutual fund adjustments, tax payments, margin finalization, and year-end clearing.
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05
Future Outlook
The 3rd up-wave is usually euphoric. Probability points to 2026 for this, potentially followed by a major fall in 2028.
Comparing The 3 Big Cycles
2003 - 2008
2009 - 2020
2020 - Present
Projected: 2026 Euphoria?
A comprehensive infographic titled 'CYCLE 1', 'CYCLE 2', and 'CYCLE 3 (CURRENT)', comparing three major market eras to predict future trends.
The chart divides history into three columns, each broken down into 'Sub-Cycles' containing Green boxes (Gains), Red boxes (Corrections), and Yellow boxes (Stagnant Phases).
Column 1: Cycle 1 (2003 - 2008)
- Sub-Cycle 1 (2003-2004): A 2.91x gain over 9 months, followed by a -35% correction.
- Sub-Cycle 2 (2004-2007): A 4.24x gain over 24 months, followed by a -35% correction. This included a 10 Month stagnant phase.
- Sub-Cycle 3 (2007-2008): A 3.04x gain over 19 months, ending in a -77% Major Crash.
Column 2: Cycle 2 (2009 - 2020)
- Sub-Cycle 1 (2009-2011): A 3.39x gain over 20 months, followed by a -46% correction. This included a 20 Month stagnant phase.
- Sub-Cycle 2 (2013-2016): A 2.44x gain over 20 months, followed by a -31% correction. This included an 11 Month stagnant phase.
- Sub-Cycle 3 (2017-2020): A 2.30x gain over 23 months, ending in a -67% Major Crash.
Column 3: Cycle 3 (Current: 2020 - Present)
- Sub-Cycle 1 (2020-2022): A 3.76x gain over 22 months, followed by a -34% correction. This included a 9 Month stagnant phase.
- Sub-Cycle 2 (2022-Present): Labeled 'ONGOING'. It shows a 2.48x gain over 27 months and a current drop of -27%. It notes a 9th Month stagnant phase.
- Sub-Cycle 3 (Projected): Faint text at the bottom predicts: 'Projected: 2026 Euphoria?' implying a potential future boom similar to the end of previous cycles.
The "Stagnant Phase"
Sometimes, a price correction isn't enough. The market enters a "Time Correction." For 9-11 months, the index goes nowhere, breadth deteriorates, and patience is tested.
"We are currently in the 9th month of this phase. Similar stagnation happened in 2006-07, 2013-15, and 2016-17. It is boring, painful, but necessary."
The "March Effect" & The Future
History shows these consolidation phases often end in March (e.g., 2007, 2009, 2016, 2020, 2023). A 10-11 month base sets the stage for the next leg up.
The reason for this March effect is largely technical: Mutual funds adjust portfolios, advance tax payments are made, margin trading books are finalized, and year-end accounts are cleared. This creates an element of portfolio adjustment and forced selling, often marking a bottom.
The Prediction (Based on Probability)
The 3rd up-wave in a cycle is historically the most euphoric. Statistical patterns suggest 2026 could be that year of euphoria. However, be warned: once that party ends (likely around 2028), history suggests the "3rd Downcycle" is often the one that brings a massive crash (like 2008 or 2020).
The Path Forward
The market is breathing. While headlines may scream about corrections or stagnation, what we are witnessing is a natural, healthy, and historically predictable cycle.
We have moved from the euphoric highs of the post-2020 rally into a necessary period of consolidation. The "Stagnant Phase" we are in - characterized by deteriorating breadth and time correction - is the market's way of clearing excesses. It is the silence before the symphony.
For the smart investor, this is not a time for fear, but for preparation.
Ignore the Noise
Don't get swayed by the daily volatility or the "index illusion." Focus on the quality of businesses you own, not just their ticker prices.
Accumulate Quality
Use this consolidation phase to slowly build positions in high-conviction stocks that have been unfairly punished. The "March Effect" suggests a base is forming.
Disclaimers
This blog has been prepared by Amaltas Asset Management LLP, a SEBI-registered Portfolio Management Service (PMS) with registration number INP00009126. It is intended solely for private distribution to the recipient and should not be reproduced, redistributed, or shared without prior written consent of Amaltas Asset Management LLP. The views and information contained in this document are for informational purposes only and do not constitute investment advice or a recommendation to buy, sell, or hold any security or financial instrument. The material is based on information that is believed to be reliable but has not been independently verified. Amaltas Asset Management LLP does not represent or warrant the accuracy or completeness of any information contained herein. This document is not an offer or solicitation for investment in any product or strategy managed or advised by Amaltas Asset Management LLP. Investors are advised to consult their financial advisors before taking any investment decisions. Amaltas Asset Management LLP, its employees, and clients may have exposure to the securities mentioned in this report. The firm may also undertake transactions contrary to the views expressed herein. Past performance is not indicative of future results. All investments are subject to market risks, including possible loss of capital.
SEBI Regulatory Disclosures
This report has been prepared in compliance with SEBI (Portfolio Managers) Regulations, 2020 and other applicable laws. Amaltas Asset Management LLP has not received any compensation from the companies mentioned in this report in the last 12 months.
