With the Nifty 50 trading below its peak and Indian equities underperforming several global markets, Kotak Mutual Fund's August 2026 'D-Kode' report has highlighted the market correction as an opportunity to add exposure to select passive investments. According to the report, the MSCI India Index fell by 6.7% in the last one year, while the US and other markets such as Japan, Korea and Taiwan performed better. The fund house suggests that corrections can be beneficial for accumulating quality companies at relatively better valuations. Recent market volatility has been driven by multiple factors including derivatives expiry and the new Closing Auction Session (CAS) on August 27, which created unusually volatile trading conditions with the Sensex falling over 2,000 points within six minutes before recovering some losses.
For market-cap exposure, the report suggested the Nifty 50 and Nifty Next 50 indices. As reported by Kotak Asset Management Company, the Nifty 50 Index is trading around its long-term average with an average price-to-earnings ratio of 18.7 times, currently trading at 18.6 times. However, the Nifty Midcap 100 Index has an average P/E of 24 times and is trading at 27.8 times, while the smallcap segment has an average P/E of 17.5 times against a current P/E of 23.3 times. The report also suggested the Nifty 100 Low Volatility 30 Index under smart-beta factor strategy for investors seeking relatively lower volatility during uncertain market conditions.
Under commodities, investors can consider gold, which delivered a 63% return between January and December 2025 but declined 7% between January and July 2026. According to Kotak Asset Management Company, gold provides diversification and acts as a hedge during periods of market uncertainty, geopolitical risks, and currency movements. Among sectors, the Nifty Bank Index can be considered, which fell 6.2% between 24 February and 31 July 2026, following the onset of the US-Iran war. The report highlighted the Nifty Consumption Index as a theme to watch, supported by rising incomes, urbanisation and higher consumer spending. Recent market developments show HDFC Bank declining 2.2% to its lowest level in nearly two and a half years due to US class-action lawsuit concerns and CEO tenure uncertainty.
For market cap, gold and sector/theme exposure, Kotak Asset Management Company's Fund Manager ETF, Satish Dondapati, emphasized that allocation can vary for each investor depending on their risk appetite, investment horizon and financial goals. He recommended that these funds are generally meant for long-term investment, preferably for at least 3–5 years. The report suggests investors can combine SIPs with staggered lump-sum investments based on their cash flows and risk appetite to navigate short-term market volatility. Current market dynamics show strong domestic institutional buying with DII purchases of ₹6,425.16 crore on August 26, while FIIs were net buyers of ₹502.63 crore, providing continued support to Indian equities despite global headwinds.
