Markets
The Nifty went nowhere for two years. India didn’t.
Prashant Jain’s September 2026 letter to his investors, in plain numbers: why Indian shares stalled while the economy kept growing, and what has usually come after a stretch like this.
All figures from Prashant Jain’s September 2026 letter to investors. Past performance may or may not be sustained in future. Sources are at the end of this note.
Look at your mutual fund statement and the last two years seem wasted. The Nifty is 12.4% lower than it was in September 2024. Yet over the same two years India’s economy grew about 7.5% a year, and companies kept earning more. Shares got cheaper while the businesses behind them got bigger.
Prashant Jain of 3P Investment Managers explains why in his September 2026 letter to investors, and what has usually come after stretches like this. The numbers below are his.
What happened
Foreign investors sold more than ₹5 lakh crore of Indian shares over these two years, mostly to buy into the AI and chip trade abroad. That selling, not the economy, held prices down. Kotak Institutional Equities, which Jain quotes, expects Nifty company profits to grow 17.4% this year and 14% next, and close to 70% of sectors grew earnings by more than 10% last quarter.
What history says
This is the part I would pin to the fridge. Jain looked at every time in the last 25 years the Nifty had a two-year fall of 15% or more, and checked the next three years:
- It never returned less than 20%.
- In 95% of cases it returned more than 50%.
- In 55% of cases it doubled or better.
After every two-year fall of 15% or more · last 25 years
What the Nifty returned over the next three years
Absolute three-year returns of the Nifty 50 Total Return Index after every two-year rolling drawdown of 15% or more, measured at month-end. Source: Bloomberg and 3P Investment Managers, as published in the September 2026 letter. Past performance may or may not be sustained in future.
Returns come in bursts
Another chart in the letter shows that most of the Nifty’s return over the last 15 years came in just four one-year spells. In between were stretches of two and three flat years, like the one we are in. The investor who stops a SIP in the flat years usually misses the short burst that follows.
Where the value is
Jain thinks large caps are the better buy right now. They trade at 18.9 times trailing earnings, against 27.4 for midcaps and 27.9 for smallcaps. Large caps took the brunt of the foreign selling, which is why they are cheaper.
He also looked at why small and midcaps did so well after May 2022. Their index returned 99% against 35% for large caps. But most of that gap came from just 16 stocks, each up more than 1,000%. Take those out and the two groups returned roughly the same.
What can go wrong
Jain is honest about the risk. If US 10-year bond yields climb above 6%, the recovery could take longer. They were 5.29% at the end of September.
He thinks most of that rise is already behind us. Yields have jumped a long way, and after adjusting for inflation they are already at the top of their past range. Morgan Stanley, JP Morgan and Goldman Sachs all expect them to ease to 4.75–5% by December. Cheaper oil would help, and oil flows through the Strait of Hormuz are back to about 90% of pre-war levels.
Even if he turns out to be wrong, his advice is to avoid panic selling and, if possible, buy.
What I take from it
Keep your SIPs running. Flat markets are when a SIP buys the most units for the same money. If your income allows, this is a sensible time to step it up or add to your core holdings, with large caps getting a fair share of the fresh money. And don’t judge a ten-year plan by its two dullest years.
Jain opens his letter with Aristotle: patience is bitter, but its fruit is sweet. Hard to put it better.
All data and views are from Prashant Jain’s September 2026 letter to investors of 3P India Equity Fund 1 (3P Investment Managers). Full credit to him and co-fund manager Ashwani Kumar.
Sources and method
- Primary source: 3P India Equity Fund 1, quarterly update to investors, September 2026 (3P Investment Managers), data as of 30 September 2026.
- Profit growth estimates are Kotak Institutional Equities’ figures as quoted in the letter. US bond yield forecasts are those of Morgan Stanley, JP Morgan and Goldman Sachs as quoted in the letter.
- Foreign selling is given in the letter as USD 58 billion. It is shown here in rupees as more than ₹5 lakh crore, which holds at any exchange rate above ₹86 to the dollar.
- Naming the letter and its fund is attribution only. It is not a recommendation of that fund or any other.
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not be sustained in future.
Questions this raises
Why has the Nifty been flat for two years when the economy is growing?
According to Prashant Jain’s September 2026 letter, foreign investors sold USD 58 billion of Indian shares over two years, largely to invest in the AI and semiconductor trade abroad. The Nifty fell 12.4% between September 2024 and September 2026 even as the economy grew about 7.5% a year.
What has the Nifty done after a two-year fall of 15% or more?
Over the past 25 years, after every two-year fall of 15% or more, the Nifty 50 Total Return Index never returned less than 20% over the next three years. In 95% of cases it returned more than 50%, and in 55% of cases it doubled or better. Past performance may or may not be sustained in future.
What could delay a recovery in Indian markets?
The main risk named in the letter is US 10-year bond yields rising above 6%, from 5.29% at the end of September 2026. Prashant Jain considers this the less likely outcome.
This note is general information at asset-class level. It is not investment advice and no scheme is recommended. RHB Wealth Pro is a distributor of financial products and is not a SEBI-registered investment adviser.
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