What to do when the stock market crashes: drawdowns, recoveries and a plan

What a crash, a correction and a drawdown mean

Market people use three words loosely:

• Correction: a fall of about 10% from a recent high.
• Bear market, or crash: a fall of 20% or more, a crash when it is fast.
• Drawdown: any fall from a peak to a later low, measured in percent, whatever its size. The maximum drawdown is the deepest one in a record.

A drawdown has two dimensions: how deep it goes and how long it takes to get back to the old peak. Both test you. A 15% fall that lasts two years can be harder to sit through than a 30% fall that recovers in six months. The blog note drawdown: depth vs duration puts our own falls on both axes.

The maths of recovery

Losses and gains are not symmetric. If ₹1,00,000 falls 20% to ₹80,000, a 20% rise takes it only to ₹96,000. It needs a 25% rise to get back. The deeper the fall, the steeper the climb.

This is why the depth of a strategy's worst fall matters more than its best year, and why the drawdown recovery calculator is worth a minute before you invest: it shows how many years a given fall takes to recover at a given return.

How long Indian market falls have lasted

A few reference points, measured on the Nifty 50:

1. 2008Global financial crisis

   The Nifty 50 fell roughly 60% between January and October 2008, and took years to regain the January peak.

2. Mar 2020The pandemic crash

   The Nifty closed at 7,610 on 23 Mar 2020, about 38% below its January high, after one of the fastest falls on record.

3. Nov 2020A new record within about eight months

   The index passed its old high on 9 Nov 2020 and set a record close of 13,055 on 24 Nov.

4. Oct 202614.5% below the January record

   The Nifty 50 closed at 22,520 on 9 Oct 2026 against a record close of 26,329 on 2 Jan 2026.

Two lessons from the list. Recoveries can be fast or slow, and nobody knows in advance which one is coming. And the start of the recovery tends to come while the news is still bad: the March 2020 low came in the same week the country was going into lockdown.

Our own record: the worst falls and the days to recover

RupeeCase publishes the worst falls of every index algo on its page, with the start date, the depth and how many calendar days it took to regain the peak. The deepest fall for most of the lineup started in late 2024.

A year below the old high is a long time to watch a number in red. The record says that is normal, not a sign that a rule has broken. The blog note max drawdown is a record, not a limit makes the other half of the point: the next fall can be deeper than any in the record.

What usually goes wrong: selling low, buying back high

The expensive pattern is the same in every crash. The investor holds through the first leg, sells after the second when the news is worst, waits for calm, and buys back after the market has already climbed. Each step feels prudent. Together they turn a temporary fall into a permanent loss.

The loss aversion module explains why the pain of a loss pushes people to act, and the note on pausing a SIP in a downturn puts a rupee figure on one version of it.

What helps instead

• Keep near term money out of equity. Anything you need within about three years, and an emergency fund of several months of expenses, belongs in debt or deposits. Then a crash cannot force a sale.
• Keep the SIP running. A fixed monthly amount buys more units when prices are low. Stopping it in a fall removes exactly the instalments that help most.
• Rebalance on your usual date. After a fall your equity share has shrunk. Bringing it back to target means buying equity when it is cheaper, by rule. The rebalancing guide covers the cost and tax.
• Check, do not react. Has the reason you invested changed, or only the price? If a company or a fund has a real problem, act on that. A falling market is not, by itself, a reason.
• Look at the record you accepted. If your strategy's worst published fall was 25% and it is down 18%, it is behaving inside its history. If you cannot sit through that depth, reduce the risk after the recovery, not at the bottom.

Rebalancing after a crash, worked

You hold ₹10 lakh at 60% equity and 40% debt. Equity falls 30% and debt earns 2% over the same months. Equity is now ₹4.2 lakh and debt ₹4.08 lakh: ₹8.28 lakh in total, with equity at 50.7%. Rebalancing back to 60% means moving about ₹76,800 from debt to equity, buying after the fall. If equity then recovers its 30% loss (a rise of 42.9%) and debt stands still, the rebalanced portfolio is worth about ₹10.41 lakh against ₹10.08 lakh for the one left alone, because more of it was in equity for the climb. It works only if the rule is written down before the fall, because on the day it feels like the worst trade in the world.

A crash plan, step by step

1. Separate the money you needkeep anything needed within about three years, and an emergency fund, outside equity.
2. Write down your worst casethe deepest fall in your strategy's record, and the rupee loss on your amount at that depth.
3. Keep the SIP runningautomate it so the decision is not made in the middle of a fall.
4. Set a rebalance date and bandfor example once a year, or when equity is more than 5 points off target.
5. Decide what would make you sella change in the reason you invested, not a change in the price.
6. Do not check dailya monthly look is enough for a long term portfolio.

How this shows up in RupeeCase

Every RupeeCase strategy page and factsheet shows the five worst falls in the model record, each with its start, depth and days to recover, next to the model curve and the Nifty 50 TRI line. You approve each rebalance before orders go to your own broker, and the rules do not change during a fall. Allcap, a momentum rule on the whole market with 50 stocks rebalanced every 2 weeks, shows a model CAGR of 44.70% and a deepest fall of −22.72%, as of 27 Apr 2026: a strong long run record that still spent 476 days below a peak. Read that line before you invest, and the risk management module for how to size a position you can hold through it.

Questions investors ask