The Compounding Life — Issue F13

Issue Thirteen · 15 October 2026 · Fortnightly

Dhansanchay

A fortnightly letter from DHANSANCHAY

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Inside: eight weeks down, and a market that has lost little · a rate hike, in one sentence · how to read a decile table without fooling yourself · what the Gita says about 145 days below the line · a remark that is not a rule · the fastest-growing economy and the market that has not followed · a festive season, and a book on failing small · why a falling market is where discipline does its work

In This Issue

I · The Founder's Notebook
II · From the Editor's Desk
III · Market Pulse

IV · In Focus
V · Mindset Corner
VI · Regulatory Radar
VII · A Closing Word

The Founder's Notebook

Bhanu Pratap Jain · CEO & Founder

The Market Has Been Falling Through Time. Price Has Barely Noticed.

There is a kind of fall that makes headlines and a kind that makes you tired. The first is a crash: a bad week, a red screen, a number that looks wrong. The second is what we have been living through. The Nifty has now closed lower for eight weeks in a row, and it spent 145 trading days below its 200-day average — the eighth-longest such stretch on record. And yet, at the close of September, it stood only about 14% below its January high. A long, tiring wait with remarkably little damage. I find that combination more interesting than any crash.

Here is how I read it. There are two ways a market can correct. It can fall through price: the index drops 30% and valuations reset in a few months. Or it can fall through time: the index goes sideways, sometimes wobbling hard within a range, while the earnings of the businesses underneath keep growing into the price. Nobody makes headlines out of the second kind, because nothing dramatic happens. That is exactly why it is hard to live through. It tests patience, not nerve. In the last stretch the Nifty has traded around 22,000–24,000 while trailing earnings kept edging up, and the index now trades at about 19 times trailing earnings against a full-history median near 21. That is a description, not a forecast.

A correction through time asks for patience, not courage. Most people find that harder.

There is a puzzle I keep returning to. India is the fastest-growing major economy in the world. At the Bloomberg New Economy Forum in New Delhi on 13 October, the Prime Minister cited growth of 7.8% for April–June, a current account deficit of about 0.6% of GDP and foreign exchange reserves above $700 billion. A day earlier, Bloomberg’s economists estimated that India’s trade agreements alone could add about $140 billion to its GDP by 2035. This week the IMF put India’s growth at 7.0% for both 2026 and 2027, as reported by The Times of India, and the same report says the World Bank, OECD, S&P, Moody’s, Fitch and the Asian Development Bank have all raised their estimates after the 7.8% quarter (the World Bank and OECD now at 7.1% for 2026–27, Fitch at 6.9%) — alongside the risks it names: oil, a weak monsoon and geopolitics. These are forecasts, and forecasts get revised. And yet the market has done the opposite: over two years the Nifty has gone nowhere, and measured in dollars it has fallen while emerging markets elsewhere rose (Section III). I have no clean explanation, only a distinction worth keeping in mind. GDP is what a country produces. An index is what its listed companies earn, divided by what investors will pay for those earnings, in a currency that has weakened. The two can drift apart for a long time. Over long periods, however, earnings have tended to follow the size of the economy. I do not know when the gap closes, and I will not pretend to. I only know which side of it I would rather be standing on.

The second thing I notice is a split I have not seen in years. Small and mid-size companies are priced at some of their richest levels relative to large companies in more than two decades, while several large, high-quality businesses are priced as if the good years were behind them. When an entire market is pulled in two directions like this, the natural temptation is to pick a side. I would rather ask a smaller and more useful question: has the mix in my own portfolio drifted somewhere I did not choose? After a long run of small and mid caps leading, a portfolio that was built with a sensible balance can quietly end up lopsided without anyone deciding it. That is not a market call. It is housekeeping.

Now the honest half. History is a guide to what has happened, not a contract about what will. The tables I have been reading are built from overlapping time windows, so they are not a hundred independent experiments; they are a handful of experiences viewed many times. Rate-hike cycles, a weak rupee, foreign selling and an oil price that will not settle are all real, and any of them can extend a wait that already feels long. I do not know when this ends, and anyone who says they do is selling something.

So what do I do with it? What I always do, which is as little as possible. The SIPs that are running continue, untouched. Nothing is sold because of a chart and nothing is bought because of one either. Where a family finds on review that one part of the portfolio has grown larger than intended, we correct it gently, in steps, with the tax in mind — not in a week of panic. And where the right answer is to leave things alone, which is more often than people expect, we leave them alone. That is the Via Negativa we talk about so often: the best action this fortnight is the one you did not take.

There is an old line we keep on the wall: the biggest money is made not in buying and selling, but in waiting. It does not say waiting is pleasant. Section V is about why it is not, and what to do with the discomfort. Sapna has the fortnight's numbers in Section II.

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From the Editor's Desk

Sapna Jain · Editor

What a Rate Hike Does, in One Sentence

Two issues ago the question was whether small and mid cap inflows would survive a harder market. The industry's September figures were released on 12 October. We are checking them against the industry body's own release before quoting any number, and they will be in the 1 November issue. I would rather be a fortnight late than carry a figure that moved.

The bigger news of the fortnight was on 7 October, when the Reserve Bank raised its policy rate to 5.50%. Several of you wrote to ask what that means for the debt funds in your portfolio, so here it is in one sentence: when interest rates rise, the price of bonds already issued falls, because newer bonds pay more; and the longer a bond has left to run, the more its price moves. That is a mark-to-market effect, not a loss of what the borrower owes you, and a fund holding shorter bonds feels less of it.

What does it change for you? For most families, nothing needs doing. A hike is a reason to check that the money you will need in the next three years is parked in the kind of holding built for three years, not in something built for ten. If you are not sure which is which, that is a five-minute question, and I would rather answer it now than after a statement arrives.

As for the market: the Nifty closed on Tuesday 13 October at 22,721.95, up 0.4% from the 30 September close. It rose more than 1.5% that day, helped by IT earnings, a firmer rupee and softer crude, along with a remark from the Finance Minister about capital gains tax that is addressed in Section VI. One good day does not make a trend and I will not pretend it does.

And, as always: if the news has made you wonder about your SIP amounts, or whether your emergency fund is where it should be, write to me before the next statement, not after.

Sapna Jain

Editor, The Compounding Life · [email protected]

III

Market Pulse

Eight Weeks Down. The Damage Is the Mildest on Record.

Seven takeaways, compiled and contextualised by Sapna Jain

Market data as at the close of Tuesday 13 October 2026, except where a date is given.

1.	Where we stand. The Nifty 50 closed on 13 October at 22,721.95 and the Sensex at 73,033.78. That is 0.4% above the Nifty's 30 September close of 22,620.45, and still about 14% below its 5 January record of 26,373.20. The day's gain was 358.60 points on the Nifty; it is a day, not a turn.

2.	The Reserve Bank raised rates. On 7 October the RBI lifted its policy rate to 5.50%. For anyone holding debt funds: bond prices move opposite to rates, and the effect is larger the longer the bonds run (see Section II).

3.	A rare streak, a mild one. The Nifty has closed lower for eight consecutive weeks. That has happened only three times since 1990. The earlier two episodes had lost 16.4% and 18.9% by their eighth week; this one has lost 8.1%. The sequence is extreme; the drawdown is not.

4.	A correction through time. As of 30 September the Nifty had spent 145 consecutive trading days below its 200-day moving average, the eighth-longest such stretch in the data, with a maximum distance of 11.5% below the line. The longest, in 2008-09, ran 227 days and went 45.3% below it.

5.	What the index costs. At end-September the Nifty 50 traded at 19.26 times trailing earnings and 2.75 times book value, against full-history medians of 20.9 and 3.5. That puts it near fair, not deeply cheap, and some way below its own past. Context, not a signal.

A market pulled two ways. Small caps and mid caps are trading roughly 72% and 56% above their historical medians relative to the Sensex, near three standard deviations above their long-run means. Over the past year, small and mid caps beat the Sensex by about 21.5% and 14.1%, while the ten largest stocks lagged the broader market by about 10.6%. Earlier relative peaks in 2007, 2010 and 2017 were followed by meaningful reversals, but history does not say when.

India versus the rest. From July 2025 to September 2026 the MSCI Emerging Markets index rose 39.3% in dollar terms while the Nifty, in dollars, fell 14.6% — a gap of 53.9 percentage points, and one with no earlier match in the data since 2006. Foreign investors' net selling over the last twelve months is about $26.7 billion; over the last three months, taken alone, it has turned to net buying of about $3.7 billion.

How Deep Had the Last Eight-Week Losing Streaks Gone?

Nifty decline over the first eight weeks of each streak of eight or more weekly losses since 1990 · per cent

1993 episode

−16.4%

2001 episode

−18.9%

2026 (ongoing)

−8.1%

The 2026 streak is as long as the earlier ones began, and by far the shallowest. That is a statement about how much has been lost so far, not about what happens in week nine.

Sources: NSE/BSE closing data; Reserve Bank of India policy announcement (7 October); NSE and Bloomberg index and valuation data (as of 25–30 September 2026), as compiled in an asset-manager market research note released 5 October 2026; Bloomberg Economics (12 October); The Times of India report on IMF, World Bank and OECD forecasts (via MSN); and the Prime Minister’s address at the Bloomberg New Economy Forum, New Delhi (13 October); press reports of 13 October. Figures as available on 14 October 2026 and subject to revision.

Editor's Read

A market can correct through price or through time. This one has been doing it almost entirely through time, which is slower, quieter and a great deal harder to sit through.

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In Focus

A Decile Table, Read Without Fooling Yourself

Educate

Take every five-year stretch the Nifty 100 has had since 2008 and sort them by how much they returned. The bottom tenth are the "bottom decile": the worst five-year stretches. The top tenth are the best. Now ask a single question of each group: what did the next five years deliver? That is the table below. It is built from index data (NSE, as of 25 September 2026), and the pattern across all three indices is the same: the stronger the five years behind, the weaker the five years that followed, and the other way round.

Index five-year returns (annualised): what came next

Index data, not scheme data. Past index returns; not a forecast or an indication of any future return. Source: NSE, Bloomberg; as of 25 September 2026.

Index	Trailing 5Y in bottom decile → next 5Y	Trailing 5Y in top decile → next 5Y
Nifty 100	4.2% → 15.5%	26.1% → 10.1%
Nifty Midcap 150	2.4% → 24.1%	24.4% → 13.6%
Nifty Smallcap 250	−2.2% → 25.2%	23.9% → 8.6%

Reading the table: in all three indices, the five years after a poor five years were better than the five years after an excellent one. The reading stops there.

Interpret

Notice what the table shows and what it does not. It shows a tendency: very high returns are hard to repeat, and very low ones tend to be followed by recovery. It does not say the next five years will follow the pattern, and the Nifty 100 today sits near the bottom of its own five-year range, while the mid and small cap indices sit close to their medians. A decile is a position on a ladder, not a date on a calendar.

Explain

There are three reasons to be modest about a table like this. First, the windows overlap: a five-year stretch starting in March and one starting in April share almost everything, so a few hundred rows are really a handful of separate experiences. Second, "bottom decile" can be bottom for different reasons, and the cure that arrived in one era may not be on offer in the next. Third, nobody can tell you the order in which good and bad years arrive, and for an investor drawing money out, order matters as much as the average. This is why we use such tables to temper expectations, not to set them.

Framework

Three questions to put to any chart that claims to tell you what happens next. What exactly is being compared, and over how many genuinely separate periods? What would this chart look like if the pattern were just luck? And if the pattern fails, does my plan still work? A plan that survives the third answer is a plan. One that needs the chart to be right is a bet.

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Mindset Corner

You Have a Right to the Work, Not to the Fruit

In the second chapter of the Bhagavad Gita, Krishna tells Arjuna on the field of Kurukshetra something that has been quoted so often it has gone smooth: karmanye vadhikaraste, ma phaleshu kadachana — you have a right to your action, never to its fruits. It is usually read as a lesson in detachment. I read it, in a market like this one, as a lesson in accounting. You are responsible for the part of the process that is yours: the SIP that runs on time, the emergency fund that is where it should be, the mix you chose and the review you do each year. You are not responsible for the part that is not: what the index does this fortnight.

A hundred and forty-five days below the average line is a long time to keep doing the part that is yours. Nothing rewards you along the way. This is where most households quietly change course, not out of any conviction, but because waiting feels like failing. The Jain tradition has a word for the antidote: samata, equanimity — treating the pleasant and the unpleasant outcome with the same steadiness, because both are passing.

The Compounding Test

Time is the biggest fund manager. It only works for those who are still there.

Put it to the Incerto test, as we do with everything. Ergodicity: can you stay in the game through the stretch that tests you? A plan you abandon in month five of a six-month wait has not been tested, it has merely been interrupted. Via Negativa: what can be taken away? The daily check of the portfolio. The sixth fund. The opinion about the rate cycle. Lindy: what has survived many such stretches? Not a forecast; the plain habit of staying invested and adding steadily. It is old and it is boring, which is the point.

On My Desk

I am reading Fail Big by Scott Allan, a book that treats failure as a cost to be paid in small instalments, not a verdict on the person. I am reading it with Taleb on the next shelf, and the two agree on something investors forget: the failures worth having are the ones you can survive and learn from. The ones you cannot survive are the ones to design out. That is a SIP, not a lump sum.

And a word on the season. Navratri began on 11 October, Dussehra falls on 20 October, Dhanteras on 6 November and Diwali on 8 November. In my own tradition Diwali is also the day of Mahavir’s nirvana, a day for taking stock rather than only for celebrating. Families spend in this season, on gifts, gold, repairs and travel. My one suggestion is the same one I would make about a SIP: decide the festive budget before the festival, keep it apart from the money that belongs to your goals, and let the Dhanteras gold be a ritual, not a portfolio decision (Section VI explains why the duty question matters). A season of lights is a good one in which to see your finances clearly.

Be smart, do nothing is not an instruction to go to sleep. It is an instruction to do the work that is yours, and let the rest take as long as it takes.

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Regulatory Radar

A Remark Is Not a Rule. Here Is What Actually Changed.

What was said. On 13 October the Finance Minister, speaking at an international forum, said she would be keen to hear market participants' views on capital gains tax on long-term holdings and on the securities transaction tax, calling the debate a healthy one. That is an invitation to a conversation. No change has been proposed, notified or announced.

Why it matters. Tax rates change only through the Finance Act or a formal notification, and both come with a published date and rules for how existing holdings are treated. Until then, today's rules apply, and the sensible response is to keep your plan exactly as it is. We have seen this pattern before: a remark moves the screen for a day, the plan does not need to move at all.

The gold duty, again. In our last issue we worked through the arithmetic of a reported cut in the import duty on gold and silver. As of 14 October we have found no official notification. It is still a reported possibility, not a decision, and our posture is unchanged: hold what you own, and do not make new decisions on the strength of a rumour.

On the watch list. The industry body's September data (checked and carried in our next issue) and any further notification on rates or taxes. Nothing requires action from you this fortnight.

Your Action · 5 Minutes

Is your portfolio still the shape you chose? After a long stretch of small and mid caps leading, the mix can drift without anyone deciding it. Write to [email protected] with the subject line "Mix Check" and we will lay out, fund by fund, how your holdings with us are split today.

A Note on This Section

This is general market and regulatory commentary for information and education — not personalised investment advice, a recommendation, or a call to buy or sell any security or scheme. Index data shown is historical, is not a forecast, and is not an indication of the return on any scheme. Views are those of the author, are subject to change, and are not an assurance of any outcome. Please consider your own goals and risk profile, and speak with us directly before acting on anything here. Write to [email protected].

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VII

A Closing Word

A Falling Market Is Where Disciplined Investing Does Its Work

Everything in this issue points one way, so let us say it plainly. When markets fall, the rupee you invest buys more. That is not a prediction. It is arithmetic, and it is the reason a long fall is often the most productive period for a patient investor, even though it feels like the least.

The same ₹10,000, in two different months

Illustration only, using a hypothetical unit price. Not a forecast or the result of any scheme.

	Unit price	Units bought
Month the market is high	₹100	100 units
Month after a 20% fall	₹80	125 units

Same rupees, 25% more units. Whether those units are worth more later depends on the market, which no one can tell you. What you control is how many you own when it turns.

What one veteran is saying. On 9 October, Moneycontrol reported on the September 2026 quarterly letter of fund manager Prashant Jain of 3P Investment Managers. As reported, he believes Indian equities may be nearing the end of a long period of underperformance and that the next few weeks or months could offer an attractive entry point for investors who can look beyond near-term volatility. He expects the latest phase of foreign selling to ease by mid-December, and the report quotes his estimate of 40–50% returns for Indian markets over three years. His case rests on resilient economic growth of about 7.5% a year in FY25 and FY26, valuations that have come down, and the view that the worst of the US bond-yield shock is behind us. The article also notes that the Nifty fell 12.4% between September 2024 and September 2026 while foreign investors sold a net $58 billion of Indian equities.

How we read it. This is one respected manager’s view, reported by a news outlet, and it is a forecast, not a fact. Others are more guarded, and the same letter speaks of downside in the short term. We do not rely on it, and neither should you: no one knows the bottom. What we take from it is the reasoning, which is the same one in Section III: valuations in the large-cap index are closer to their long-run averages than a year ago, and this is the setting in which a steady investor is rewarded by time, not by timing. The 40–50% is his estimate, not our expectation, and not an indication of what any scheme may deliver.

What this means for you. If you run a SIP, the right thing to do in a fall is the thing you are already doing: let it continue, on the date, for the amount. If anything, this is a reasonable moment to ask whether the amount is still right for the goal it serves. If you hold surplus meant for equity and will not need it for seven years or more, the conversation to have is about putting it to work in stages over several months, so that being early or late on any one day does not decide the outcome. Money you may need within three years, and your emergency fund, stay where they are.

Four habits that matter more than the market. Start with a purpose: know what each investment is for. Invest regularly: build a habit that fits your finances. Give it time: long goals need a long view. Review periodically: keep the investments aligned with a life that changes. Compounding does not guarantee a profit and mutual fund investments are subject to market risks. What it rewards is the investor who is still there.

The aim is not simply to invest more. It is to invest more meaningfully, and to keep going when it is hardest.

A closing question to take with you: am I investing enough for the future I want? If your income, savings or responsibilities have changed, or if a falling market has made you wonder, write to us. There is no need to rush or to go beyond your comfort. Boring advice. Beautiful outcomes.

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This Issue

Bhanu Pratap Jain

CEO & Founder · The Founder's Notebook

[email protected]

Sapna Jain

Editor · Market Pulse, Research & Dispatch

[email protected]

DHANSANCHAY

Boring Advice. Beautiful Outcomes.

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Disclaimer: Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not indicative of future returns. This newsletter is for informational and educational purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security or scheme. Please consult your mutual fund distributor or a SEBI-registered investment adviser before making investment decisions.

A note on how this is made: research and drafting are assisted by AI tools. Every figure is verified against primary sources, and all editorial decisions, the views expressed in Bhanu's section, and the final content are the sole responsibility of DHANSANCHAY.

You are receiving this as a valued client of DHANSANCHAY (ARN-171748). · Next issue: 1 November 2026