Concerned with the market pullback? Here's what happened in the past

It’s no secret that the markets are off to a rough start this year. This has been made worse by the US market performance and the potential trade war started by President Trump. After Monday’s market close, the YTD returns on the Nifty 50 and Nifty Bank are -6.3% and -2.0%, respectively. While total returns are the most important over the long run, most investors look at the “high-water mark” – the highest price the market has seen – and how far from this high-water mark that prices have fallen. This decrease from the high-water mark is known as the max drawdown. Here is an illustrative example:

You invested ₹100 in January.

• It grew to ₹120 by June
• But then fell to ₹90 in September
• It rose to ₹110 by the year-end

Your max drawdown was -25% (₹120 to ₹90). However, you still ended the year 10% higher, but you had to psychologically endure that 25% drop before the recovery.

The max drawdown for the Nifty 50 and Nifty Bank for 2025 is -15.8% (4 March) and -12.0% (11 March), respectively. Since then, the markets have recovered and the current drawdown as of April 4 stands at -15.5% for the Nifty 50 and -8.3% for the Nifty Bank.

Let’s take a look at the historical max drawdowns. In particular, we’ll look at the worst drawdowns for each year and add another data point: The return for the entire year which includes the max drawdown (‘Annual Return’). This shows the buy-and-hold return for the year. As you can see, in most years the markets were able to recover from the losses and still end up on a positive note.

Max Drawdown and Full-Year Returns

Nifty 50 Historical Drawdowns Table

From the data above, the average max drawdown for the Nifty 50 over the last 23 years is -22%. While past returns aren’t indicative of future results, we can learn a few things based on this data. We can see that even in some of the worst years, the outcome still ended up favourably. In addition, following the sharpest drawdowns, the market often had spectacular returns. The challenge, of course, is that predicting the exact bottom is not practical. Of course, with rupee-cost averaging and systematic investing, you don’t have to worry about timing the market. If share prices are lower and you continue to invest the same amount periodically, you can purchase more shares than you would have had prices not been lower. When the market turns around, you now own more shares for your money.