Crash coming?

Summary: Two loud camps, one quiet truth: nobody can time what comes next. Yet most investors are taking risks they don’t even recognise. This cover story breaks down what matters when markets look unstoppable and why the biggest risk often sits in your own decisions. If you spend enough time around equity markets, you discover a simple truth: no one just has an opinion. Everyone has a forecast. Over the last few years, the forecasting business has united almost everyone from TV experts to college students with a trading app: Indian equities only go one way. Up. Look at what has happened since the Covid panic of 2020. Back then, monthly SIP inflows were about Rs 8,000 crore, and the industry was worrying about mass redemptions. Today, we routinely collect close to Rs 30,000 crore a month. In October 2025 alone, investors poured in a record Rs 29,529 crore through SIPs, more than three times the pre-Covid monthly rate. Step back further, and the picture gets even more dramatic. Demat accounts have exploded from around 4 crore in 2020 to over 20 crore by 2025, driven heavily by investors under 30. So, why has everyone rushed in? High returns and convenience. From the Covid lows, even the Nifty 50 delivered mid-teens annualised gains, while mid- and small-cap categories briefly showed 25–30 per cent returns. Pair that with e-KYC, UPI and apps that let you start a SIP before your coffee cools, and investing has become as normal and as casual as ordering food. On the surface, this looks like the dream “mutual fund sahi hai” moment. Households shifting from gold to financial assets, using SIPs rather than stock tips and then staying invested through volatility. What could possibly be wrong? Quite a bit, as it turns out. Success breeds amnesia. After years of uptrending markets and quick V-shaped recoveries, risk feels theoretical. Many new investors have never seen a prolonged downturn. The 2008 Global Financial Crisis and the dot-com bust in the early 2000s sound like stories from another century. And when so much money enters the market so quickly, from investors who have seen only the pleasant half of the equity cycle, a new danger appears in the shape of confident misallocation. This cover story isn’t another “don’t worry, be SIP-py” sermon. We believe in mutual funds. That is exactly why we must talk about their real risks, the ones that never make it to ads or influencer reels. Which is why we will read the pulse of the Nervous Nellies who think this party has gone on too long, and the bull brigade who think it has only begun, and then ask the harder question: what if both sides are partly right, and the real risk is not the market at all, but us? From there, we look at the risks of investing in mutual funds, something most of us haven’t been made aware of, and how to handle them without either dumping your SIPs or losing your sanity. What are the ‘experts’ saying? “Beauty lies in the eye of the beholder,” goes the cliché. In the stock market, expensiveness lies in the spreadsheet of the beholder. Right now, those spreadsheets have split the commentariat into two noisy camps, the pessimists and the optimists, and the visual lines them up neatly for you. In the red corner sit the warriors of caution. You can almost hear the subtext: wonderful country, great companies, but at the wrong price. Please calm down. In the green corner stand the optimists, smiling into the same data set and declaring, “Relax. You waited 30 years for this kind of structural story. Don’t blink now.” The most striking thing about the visual is how easy it is to find intellectual support for whichever mood you prefer. But before choosing a side, it helps to understand what each camp is really saying. So, who is right? Let’s disappoint you early: no one knows whether a crash is coming. Not the pessimists warning about valuations, not the optimists waving the long-term flag, and certainly not the forecasters on television. What we can do is understand the logic of both camps and what their arguments mean for investors. So we begin, reluctantly, with the uncomfortable side of the ledger: the case for pessimism. The case for pessimism The ‘Buffett’ meter starts blinking. The first red flag is simple and old-fashioned: price. Look at the chart titled ‘India’s market looks expensive’. It plots India’s market-cap-to-GDP ratio over time. For years, India moved in a comfortable middle zone, in which listed companies were worth less than the economy’s annual output. In the last few years, that line has climbed above its long-term average and now hovers well over 100 per cent. In plain English, the total value of all listed Indian companies is now higher than the country’s annual economic output. However, this doesn’t automatically mean that a crash is imminent. What it does mean is that markets are pricing in a lot of future good news upfront. From this starting point, even decent earnings growth can translate into ordinary returns. Any disappointment can hurt more than usual. Of course, copy-pasting the same threshold to every country is lazy. In a developing market with low financialisation, a rising

This article was originally published on December 20, 2025.