Managing Market Volatility Through Portfolio Rebalancing: Challenges and Opportunities in Emerging Markets (With India As the Focal Case Study)

This study explores the role of portfolio rebalancing as a vital, yet underappreciated, component of investment strategy within emerging markets—particularly India. While rebalancing is not intended to maximize returns, it serves as a disciplined risk-control mechanism that ensures long-term asset allocation aligns with investor goals and tolerance. In environments marked by volatility, sentiment-driven retail behaviour, and limited institutional infrastructure, the practice of rebalancing remains inconsistent and often misunderstood. The research identifies four central challenges: behavioural biases like return chasing and loss aversion; operational frictions such as tax implications, transaction costs, and lack of automation; gaps in financial literacy, especially outside metropolitan areas; and weak data transparency from advisors and platforms. These impediments collectively erode the effectiveness of strategic portfolio management among retail investors.