As investors grapple with a turbulent market, Parag Parikh AMC’s Chief Investment Officer Rajeev Thakkar has a simple message — market corrections are normal, and equities are only for long-term investors. Addressing concerns over whether the worst is over, Thakkar refused to make predictions but stressed that short-term investors should reconsider their approach.
"The unfortunate part is there's never a clear answer for the future. Things are very, very obvious when we look back. So hindsight is perfect," he said in an exclusive conversation with Business Today TV. "Equity as an asset class is something that should be owned only for long-term wealth creation — goals like future education of a newborn or for retirement needs. It's an asset class that is not amenable for very short to medium-term needs — let's say two- or three-year goals. Those are best served by fixed-income securities rather than equities."
Thakkar pointed out that market corrections are routine, but many investors who entered after COVID-19 have not experienced such a downturn before. "A lot of investors have come to the markets post-COVID, both in terms of the demat accounts owned and the folios created with mutual funds, who would not have seen such a drop earlier. But let me communicate to them very clearly that this is part and parcel of the journey, and only come here if your goals are very long-term in nature," he cautioned.
On the question of whether the worst of the decline is over, Thakkar remained noncommittal. "Is the worst behind us? Unfortunately, I don't have an answer to that," he admitted. He also offered a broader perspective on market unpredictability. "If we were having this conversation in February 2020 or January 2020, would we have known that in two or three months, all of us would be locked down in our homes and there would be this extent of damage from the pandemic? The answer is no. That was unpredictable," he said.
"Just like life is unpredictable, markets are unpredictable because they mimic life and the business environment. What we do know is that five years from now, ten years from now, it is very likely that well-run companies will be earning much higher profits compared to today."
He noted that while many companies have already endured the worst of the fall, others remain vulnerable. "To answer the question — is the worst of the worst behind us? In a lot of companies, yes. In a lot of companies, the answer is no. If a business is not very strong and the earnings multiple was, let's say, 100 times before this fall started and the stock has fallen 20%, then the 100 PE stock has become 80 PE. Does that make it cheap? The answer is no. Can it fall further? The answer is yes."
Thakkar’s comments come amid a broader market downturn that has shaken investor confidence.
Market veteran Shankar Sharma has been blunt about the situation, arguing that many new investors need to experience pain to truly understand market cycles. "Stock markets—this is the way the game works," Sharma said recently. "Let them also suffer what we have suffered over 35 years."
SIP investments, which had been rising for years, have now begun to decline, signaling investor caution. Active SIP accounts in direct-plan mutual funds reportedly dropped by nearly one million in January, as investors reassess their positions amid the market correction.
The BSE Sensex has fallen 13% since October 2024, while midcap and small-cap indices have plunged 22% and 25%, respectively. Heavy selling by foreign institutional investors (FIIs), rising US bond yields, a weakening rupee, and stretched valuations have added to the pressure.