Volatility Isn’t the Enemy. Complacency Is

At Xylem, we neither claim nor possess the ability to time the absolute top or bottom of the market. That kind of precision belongs more to fortune tellers than to investors.

What we do believe in, with conviction, is understanding where we are in the cycle and responding with clarity and discipline.

Right now, several signs suggest it is time to play defense more than offense

What the Market Is Telling Us

Beyond the growth numbers and valuation multiples, there are several soft signals beginning to show up. We have seen these before in past cycles, and their recurrence is telling:

* A steady increase in promoter selling, even in companies that appear to have no immediate capital needs

* A noticeable rush of IPOs, many from businesses still building their long-term credibility

* Rising retail leverage, with margin books expanding

* Growing retail interest in unlisted equities, often driven more by narrative than underlying fundamentals

* TINA Factor - There is no alternative to equities

Individually, none of these are red flags. But taken together, they indicate late-cycle behavior. A phase when optimism starts crowding out caution.

What We Are Doing

We believe the market is currently in a time correction phase. Prices may stay elevated, but progress beneath the surface is uneven. Valuations tend to reset not through steep falls, but through a period of sideways movement and moderation.

Historically, this is the phase during which new bull market leaders quietly take shape

We are gradually aligning our portfolio toward businesses that exhibit:

* A fresh earnings cycle, not yet priced in

* Visible promoter confidence, reflected through active buying

* Low institutional ownership, which offers room for long-term re-rating

These opportunities are not widespread. But our research is beginning to uncover them. This is not a time for hyperactivity, but for clarity. Not a time to react, but to position.

What Should Investors Do

There is a way to participate in bull markets, and a way to navigate bear phases. Both require different skill sets. We have experience playing both sides of the cycle.

We do not rely on prediction. We rely on preparation.

It is wishful to think that anyone can invest precisely at the bottom. Only two kinds of people manage to do that gods and liars. For the rest of us, the best way to navigate this phase is by being highly selective and preparing portfolios with businesses that can potentially lead the next cycle.

Trust that we are spending our time where it matters most. Studying signals. Validating them through deep research. Stress-testing our theses. And preparing for the next up cycle with intention.

If you'd like to discuss your portfolio or explore how Xylem can help you navigate this market, consult with us here.