Reflecting on the period, Sandeep Tandon, CIO, Quant Mutual Fund in an interview to ET Now said, “See, important or key data point is that when you see this sort of extreme level of greed comes in in some of the stocks the valuation spiking, how well you are able to hold your emotions and not able to say no to these opportunities also, I think that will be an important observation because lot of people get sucked in in these cycles.” He added that history repeatedly shows the cost of chasing momentum at the wrong time. “And maybe in historical we have seen when you actually sucked in at the peak of the cycle and then the impact is much more meaningful, more psychological, less financial and that has its own impact on your own understanding of the market or the portfolio construction.”
Despite the Nifty touching record highs, the pain across many portfolios was hard to ignore, especially in mid and smallcaps. According to Tandon, one of the biggest lessons was that even seasoned professionals are not immune to market euphoria. “See, the important learning is that even if you really look at even best of the money managers, smart strategists, best of the investors who people respect, they also get carried away when we are seeing that promoters are selling, private equities are selling fully knowing that…, I always believe one thesis, promoters are the biggest insider, private equity are quasi promoter, they are the biggest insider.” He questioned the logic of buying when insiders are exiting. “When they sell, they do not see value at these particular prices then how come we as a money manager see value in some of these names.”
He pointed out that strong inflows often masked underlying risks. “So that is the important observation and we see best of the names getting carried away in these participation and we all talk about the supply is very large but look at the money flow which is mutual funds are getting.” According to him, participation was not forced. “Everybody says there are other opportunities also. It is not necessary you have to participate fully knowing that promoters are exiting, fully knowing the valuations are expensive, and we all tend to participate.”
Placing responsibility squarely on investors, Tandon said, “Obviously, one cannot blame to the bankers and the brokers or the promoter, it is the investor themselves to be blamed first because they are participating.” He added that blaming regulators or intermediaries misses the core issue. “We always hear that okay IPOs are coming at expensive valuation, regulators should look into it or the bankers should look into it. Why not investors should themselves…, they have to do their own analysis whether they want to participate.” Demand, he said, ultimately drives supply. “Since they are participating, if there is a demand, supply will come at every price. So, it is all about demand game. If there is no demand, the supply will not come.”
Summing up the year, he said, “So, it is an important learning and observation which we saw in 2025. So, it was like unforgettable 2025, something similar trend you might see maybe in the beginning of 2026 also because that cycle is still not peaked out, people are still participating.” On the prospects of recovery, Tandon struck a selective note. “So, not all. If you say that it will be all around bullish move. No.” Instead, he is focusing on overlooked areas. “I am looking at select opportunity, the sector which has or the stock we talk about which has relatively attractive valuation now, relatively underowned. They are trading in neglected zone.” Historically, such stocks tend to recover faster. “Those are the stocks which have potential to come back and there is a trend we have seen when the bounces come, these are the names which are coming back.” In contrast, excesses take time to unwind. “As compared to all those names which were in fully admired territory, expensive valuation, extraordinary hype, those are the names suffering has just started. The big pain is still pending.” From a macro standpoint, Tandon believes conditions have improved meaningfully. “So, let us understand from India macro perspective as compared to January 2025 versus January 2026. Our macro picture is far more superior.” He highlighted exhaustion in foreign selling. “We have seen extreme exhaustion in the selling point which we have seen from the FIIs perspective.” According to him, the market is transitioning. “So, if I look at the cumulative data points in 2025 was the beginning of that correction and it is a bottoming characteristic which we are seeing, it was a peaking characteristic in 2025 and 2026 a bottoming characteristic.”
Policy measures could further aid recovery. “So, when economy is coming back, government is putting lot of effort in boosting the consumption whether from the GST rationalization or talk about income tax perspective or some policy changes, I think then 2026 should be a better year as compared to 2025 and obviously economy is going to come back.” He sees opportunity in economically linked sectors. “Now, anything which is more related economic centric stock should do better whether you talk about NBFC, whether you talk about banks, you talk about large infra names.” Even as capex has moderated, he remains constructive. “Despite that capex cycle has reduced a bit and overall capex has come down but there are certain opportunities which is visible because some of these names have corrected or consolidated for a longer period of time and these are the name, have potential to recover from the current levels.”
However, risks remain acute in segments driven by hype. “All these hype which we have seen in the so-called new age expensive IPO, this is the pain point where supply will keep on coming on, let us say, perpetual basis.” He warned that exits are far from over. “Because if private equity has to exit, they will exit till the time their holding comes down to zero.” As a result, pressure could intensify. “So this is where I see major amount of pain because last year extraordinary money went into some of these names and a lot of people are stuck.”
Tandon urged investors to look closely at post-listing performance. “If you now sit down and analyse the IPO, what are the number of IPO came and how many stocks are trading below the IPO price and how many stocks are trading significantly below the IPO price, you will get some answers.” Over time, patience may wear thin. “And as time passes, one quarter, two quarter, one year, people will start getting impatient about it that they are getting negative returns.”
As markets move into 2026, the experience of 2025 serves as a stark reminder that valuation discipline and emotional control remain the most critical tools in navigating cycles driven by excess and optimism.
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