Bear Market Alert? Invest or Stay Put, But Don’t Panic.

Bear Market Alert? Invest or Stay Put, But Don’t Panic.

Stock markets in India are crashing as of 16th June 2022 as Sensex dipped by 1000 points and Nifty reached a 52-week low. What does this crash mean for investors as they struggle to make sense of this sudden bear market scenario? 

Some of the reasons that are associated with the market crash are the announcement of US hiking its interest rates by 75 basis points while simultaneously downgrading the growth forecast for the 2022 to 2023 period. Moreover, Foreign Portfolio Investors have pulled out money from Indian stocks to the tune of Rs 19,2104 crore. This will prove to be an insurmountable headwind for the Indian Stock market. 

However, what stand should investors take at present? Should they sell and hedge their losses or should they stay put or should they invest?

Statistically, it has been observed that India is a consumer-based country. It lives off imports and production. Moreover, after every market crash, there is usually a rise in markets. This can be observed in the chart below. Hence, market investors should understand that this is not a situation where one should panic but one should hold on to one’s investments. In the long-term, markets will again look up. 

The chart below clearly details that the crash of March 2020 was succeeded by a massive bull market. Hence, the right course of action for investors panicking is to stay put or invest in shares at a low price. Wait. This too shall pass. And when it passes the markets will rise to their former levels. 

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Mutual fund valuations may be showing negative returns but in future, this is likely to correct with the market. Hence, do not worry and continue to invest in mutual funds whether SIP or lump sum.