A person who purchased the German index fund in 1933 – when Hitler came to power — had outperformed the corresponding bond investor by 1955, even though the devastation of the Second World War took place from 1939 to 1945. Equities fluctuate from day to day, but deliver the highest returns over long time horizons. The almost impossibly pessimistic scenario about a downturn in India probably involves 6-7% GDP growth for at most two to three years. Even in that case, nominal GDP growth will be roughly 15%. The corporate sector will then register 15-20% sales growth. This will be slow when compared with the torrid pace of recent years. But it will also not be like the worst fears being expressed today. The most important thing that investors need to be is to not panic. Equity investment has always been a sensible proposition keeping the long-term in mind.

In a recent article in the New York Times, Warren Buffet suggested it was the time to buy equities despite uncertain times ahead. In the summer of 1932, he pointed out, stocks started rising long before economic activity picked up. In truth, equities almost always lead the economy out of recession.