Investment Mirage

“Be fearful when others

are greedy and greedy

when others are fearful.”

— Warren Buffett

There are two kinds of financial fear. There is the fear of losing money you need and feel you can earn from investments, and there is the fear of watching your money sit still while everything and everyone else moves ahead. In 2025, the Indian investor discovered a numbing mix. The stock market, for long a temple of promise for middle‑class dreams, handed out a humbling performance. While the Sensex and Nifty posted modest gains, the scrip-by-scrip reality was anything but celebratory. A majority of stocks delivered returns lower than even the interest available on Fixed Deposits from banks, including State Bank of India, for long the sanctum of cautious Indian savers.

Eight out of 10 actively-traded BSE stocks failed to beat FD yields, a grim reminder that the much-touted ‘wealth creation’ machine can also feel like a slow treadmill, not a rocket ship that takes off to tame the universe. Bull market narratives proclaimed a decade or half of gains for the Nifty, but for households putting principal and peace of mind first, the brouhaha felt distant. Dalal Street underperformed all global peers, disappointed foreign investors and left retail participants wondering if the meme‑fuelled chase for high returns had morphed into a trap of unmet expectations.

FDs: Comfort or Conundrum

The old guard of investment advice still echoes: “Put your money in an FD and sleep peacefully.” For generations, FDs were sacrosanct, promising safety of the principal and a yield that was predictable, thus providing a sense of security. In 2025, SBI’s FD rates hovered in the 6-7-per cent range. Amidst such modest returns, tiny spikes or dips in FD rates were debated like cricket scores. And therein lay the irony. While FDs promised certainty, they rarely guaranteed growth or beat inflation and tax. At effective inflation rates in the high single digits, an FD paying 7 per cent delivered real returns close to zero or even negative after tax, particularly for those in higher tax brackets.

Clearly, today’s truth is that what feels like financial serenity can erode purchasing power, consigning savings to stagnation as expenses climb. Such corrosion nudged households in 2025, cautiously at first and then with urgency, to revisit where savings were parked. For many households, direct equity investing feels too volatile, unpredictable and reminiscent of ‘10X returns in 10 days’ memes.

The contradiction for investors is: The stock market can deliver rich long‑term rewards, yet in the short and medium terms, it often behaves in ways that make risk‑averse savers nervous. A year when most stocks underperformed the FD benchmark is not an anomaly; it is a symptom of selective gains and concentrated performance. In 2025, while benchmark indices rallied modestly, much of the returns were limited to a handful of large cap stocks. Mid‑ and small‑caps languished.

Record Sums Pulled Out

Foreign institutional investors, once drivers of enthusiasm and liquidity, pulled out record sums in 2025, netting Rs 1.6 lakh crore of equity from Indian markets, the largest yearly withdrawal on record. The exodus dealt a psychological blow to retail investors, though domestic flows and Systematic Investment Plan (SIP) contributions somewhat cushioned the market slide. The eroding faith has echoed across investor forums, where frustrated participants have lamented that even in a year of rate cuts, healthy monsoons and economic reforms, the market “just didn’t move”.

This underperformance has deep implications. For average Indian households chasing returns at par with or exceeding FD yields, the reality has been humbling. Gains in market indices do not necessarily translate into better-than-FD results for every investor, especially those with portfolios weighted toward mid- and small caps, where the underperformance has been the most painful.

What does an investor do when both safety and growth are elusive? The answer lies not in panic, but in pragmatism. Investors need to rethink the binary choice between FDs and stocks as a dishonest dichotomy. FDs provide capital preservation and liquidity, especially for those with short- to mid-term goals. For long‑term market aspirants needing to defeat inflation and create wealth, FDs are just not suitable. The enemy grinning at market hopefuls today is not volatility, but wealth erosion because of stagnation. Real returns — after inflation and tax — are the potion, and a 7-per cent FD can translate into negative real returns for someone in a high tax bracket thanks to inflationary headwinds.

Steady Participation is Key

The good news is that tech‑enabled, disciplined strategies like SIPs stayed resilient even in difficult markets. Year 2025’s surprising insight was that SIP-backers saw 97 per cent of mutual fund schemes deliver positive returns, with rates of return as high as 37 per cent in some cases, a testament to steady presence in markets, not erratic entries or exits. Mind you, it is not multi-bagger headliners but hard-nosed and statistically-grounded portfolios that rewarded patience in the year gone by.

A broader palette of investment options also cushioned risks without crippling returns. Since 2024, over 260 debt mutual funds have outperformed top FD rates, offering a blend of safety and yield superior to traditional bank deposits, especially in a declining interest rate environment where bond prices have appreciated. Corporate bonds, government securities and select infrastructure investment trusts provided alternatives for investors looking beyond binary choices.

Equities were compelling instruments too, but only for those who viewed returns through a disciplined lens. Broad‑based equity and index funds allowed access to growth without the risk of single stock picking. Long‑term returns outpaced inflation and fixed income over extended periods (5 years or more), provided that investors avoided impulsive buy‑sell decisions driven by short‑term noise.

Mindset Shift Needed

Juggling these options demands something more elementary than market knowledge: a mindset shift. Traditionally, Indian investors have not avoided equities out of ignorance, but have approached them with unrealistic expectations. The fantasy of 3X-5X returns in a year, pushed by social media and headline-grabbers, sets a bar that most stocks just cannot clear. After all, the market isn’t a lottery ticket, and chasing lottery returns is anyway a sure play to convert wealth into regret. The wiser, if less thrilling, path recognises that long‑term compounding at moderate rates beats short‑term gambling. The investor who tolerates volatility, spreads risk and spends time in the market, rather than exiting it in panic, is more likely to see growth over decades than one who chases hot tips.

For India’s middle-class, the way forward lies in balance, not extremes. The era of thinking in simplistic binaries – such as FDs for safety and stocks for aggressive growth – has given way to a more nuanced tapestry of investment choices. In a global village where inflation is a reality, interest rates fluctuate and markets are always volatile, part-allocation to equities can help beat inflation while preserving capital prudently in safer instruments.

Education is crucial. Households, financial advisors, employers and regulators share the responsibility of demystifying markets and helping investors construct portfolios aligned with real goals, rather than headlines or fear. In this landscape, growth and safety are not antagonists; they are co‑dependents, requiring diversification, clarity and mental steel to battle volatility. India’s savers deserve strategies that neither lull them into passive stagnation nor lure them into reckless risk.

The challenge of 2025 was not that markets were broken, but that expectations were misaligned with reality. The lesson of 2026 is resilience. The resilience to seek real returns. The resilience to withstand short‑term turbulence. The resilience to see investing as a marathon, not a sprint. In the world of money, the dramatic stories are not those of windfalls, but of wealth creation that endures. For India’s middle-class, that story is only just beginning.

The writer can be reached on narayanrajeev2006@gmail.com. Views expressed are personal. The writer is a veteran journalist and communications specialist