A client's 70/30 portfolio has just lost ground after a 22% fall in equities, and he calls to sell everything. What are his weights now, what does his policy say to do, and what would selling lock in?

Equity is now 64.5% of Rs 152.3 lakh, and his policy says buy about Rs 8.3 lakh of equity, not sell. His Rs 126 lakh of equity is worth Rs 98.3 lakh; debt is still Rs 54 lakh. Selling everything would turn a Rs 27.7 lakh paper fall into a realised one, and equity would need to rise 28.2% just to get back to where it was. Nothing about his goal or horizon has changed.

Work in rupees first, then weights. Equity was Rs 126 lakh and is now Rs 126 lakh times 0.78, Rs 98.28 lakh. Debt is unchanged at Rs 54 lakh. The portfolio is Rs 152.28 lakh, and equity is 98.28 over 152.28, 64.5%, a drift of 5.5 points below target. Notice that equity fell 22% but the weight fell only 5.5 points, because the debt holding cushions the total. The portfolio is down 15.4%, not 22%, which is worth telling him in those words.

The drift is more than 5 points, so the rule triggers. Target equity is 70% of Rs 152.28 lakh, Rs 106.60 lakh, so the trade moves Rs 8.32 lakh from debt funds into equity funds. A rebalancing rule is a decision taken calmly in advance so that it does not have to be taken in a panic: it buys what has fallen and sells what has held up. It is the same logic as a shop that restocks the shelves that emptied, rather than the ones that did not sell.

Selling realises the Rs 27.7 lakh fall. From there, getting back needs equity to rise 28.2%, and a client in a deposit cannot participate in that recovery unless he times his way back in, which people who sold in fear rarely do. Be honest about the other side too: if markets fall another 10%, the rebalanced portfolio ends Rs 0.8 lakh below simply holding, and Rs 10.7 lakh below selling. Rebalancing is not a forecast. It is a discipline that pays over many cycles because it buys cheaper and sells dearer on average, not in every episode.

Listen first, then bring him back to his own plan. Ask what has changed: his job, his health, his need for money before 60. If nothing has, then the portfolio's purpose has not changed either. Show him the numbers in rupees: his portfolio is down 15.4%, not 22%, and the plan he signed calls for buying. If he still cannot sleep, a smaller step is better than a sale: rebalance halfway now and the rest in a month, or agree to review the policy's 70% in a calm week rather than today. If his circumstances have genuinely changed, change the policy, then the portfolio, in that order.