Market Is Falling: Is it the Time to Take Entry or Exit?
The sharp plunge in the market may sink your heart a bit. The fall in both Sensex and Nifty may increase an urge to cut down your equity holdings in the market. We can empathize with your emotions but would suggest you to be patient.
Do you think exiting the market is the right step in the current scenario? Or, is it the time to take advantage of the market dip by investing more money? Let us try to seek the answers to some of the obvious questions that arise during such situations.
Why is the Market Going Through the Correction?
The market might have had a weak February, but experts deny the talks of it being at the edge of a big correction. They acknowledge that this can happen even in a bull market. Both the Sensex and the Nifty have seen 7% dip this month so far, specifically after the Union Budget announcement and the turn of events around Punjab National Bank. The market has seen volatility persisting throughout the preceding month, but the experts are recommending keeping patience.
Market Sentiments are Momentary: Do not Panic
Will this trend continue in the near future? India has strong fundamentals, and even the markets are cyclical. So, there may be many immediate local and global factors such as rate hike and oil price fears which have triggered the current volatile circumstances. But, the space has seen double-digit returns after years and expects this momentum to get better. Sluggishness in the performance of the emerging markets like India over these situations is natural. And as per the current scenario, if the oil prices go above $70, it could hurt the market. Additionally, the imposition of GST, approaching elections, and the measures taken to develop the agricultural sector might turn inflationary over the next 12 months. But the Indian economy has paced up in the last quarter portraying progressive signs in the long run. Hence, the investors are advised not to worry too much about that, as this shock could be temporary.
Apply Right Strategy Before Entering or Exiting
Investing in market involves risk but employing the appropriate strategy can turn the dip into opportunity. These types of situations can be pivoted to obtain benefits of the lower NAVs. If you recognize and invest a part of your investment in strong companies, it will prove to be justifiable. In such cases, stick to the firms paying dividends, having a strong brand, and are low on debt. The mistake that most of the investors commit during the market correction is – Timing the market. Selling when the market is down can incur you loss. What you require is to strategize you buying and selling. There can be three strategies based on the maturity of the investor’s investment.
- Beginner: If you are a beginner and trying to enter the market, correction phase can be a good start. You must not just go by the sayings and panic while investing. In accordance to the current sentiments, the market might has seen about 7-8% of fall but the analysts feel it is profitable for the beginners to invest right now. You must target for long-term goals via your investment. Those who are trying to enter the market during the correction can start by investing in low risk funds. The short-term factors manipulating the market would only compel you to overlook the long-term investment opportunities.
- Already Invested but Investment Maturity is not Reached: In case you have already invested but have not attained your goals, we would advise you to have patience and not disturb your investments during the short-term disruptions. We might not anticipate the returns to be as aggressive as that of 2017, but investors can look forward to reasonably decent returns on a 2-year basis at this stage. During this correction, if your asset allocation changes, rebalance your portfolio by buying more units. All you need to do is, be disciplined and rational and not start offloading assets. Instead, take such market correction as an opportunity and rebalance your portfolio to invest in low risk funds. As an investor, you have to adapt the volatility of the market and should not restrict the inflows into it. We would indicate the investors not to time the market during the short-term fluctuations and stay invested.
- Already Invested and Investment Maturity is Reached: If you have been invested for a long-term, keep a check on your portfolio and stay committed to your investment objective. Once the dust settles down, the prevailing crisis might turn into an opportunity to grow. Exit only in case, you have reached your investment goal and think further correction can devalue your returns. Look out for the most legitimate chance to take the Exit as soon as your investment reaches the maturity period.
The Bottom Line
As simple you embrace the things, the results will turn brighter for you during the market disruption. Apart from the ups and downs phase of the market sentiments, make it a habit to review your portfolio regularly. It not only helps you maintain a check on the progress of your investment towards your goals but also analyzes its past performance. Apply the right investment strategy that would help your investment reach the target in spite of the market volatility by adjusting your invested amount. Do not time the market and simply exit your investment as soon as the space undergoes a plunge. Take your investment decision smartly and timely with the help of experts like the ones at MySIPonline.
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