Falling Markets Revisit Your Investment Strategy
After five years of a strong and steady bull run, Indian markets are finally taking a pause. For the last six months, the upward trend has broken. Early March brought a sharp correction. Then came a quick bounce. But now, markets are dipping again, this time reacting to global concerns like US tariff developments.
It's a confusing time. Investors are nervous. Portfolios are bleeding. And everywhere, the same question is being asked - should I invest now or wait for things to settle?
Let's break this down together.
It's a confusing time. Investors are nervous. Portfolios are bleeding. And everywhere, the same question is being asked - should I invest now or wait for things to settle?
Let's break this down together.
The correction we're seeing is not minor. Large cap indices have fallen by 15 to 17 percent. Mid and small caps have taken a bigger hit, dropping between 20 to 24 percent. These numbers aren't just dips - they're deep cuts that deserve attention.
But history tells us something very important. Big corrections have often been followed by strong recoveries. Markets reward those who stay calm during chaos. The challenge is not in knowing whether the market will bounce back - it always does. The challenge is in being ready when it does.
But history tells us something very important. Big corrections have often been followed by strong recoveries. Markets reward those who stay calm during chaos. The challenge is not in knowing whether the market will bounce back - it always does. The challenge is in being ready when it does.
Are Markets Still Overvalued?
To answer this, we look at two of the most trusted indicators - the PE ratio and the PB ratio of the Nifty 50 index.
Right now, the Nifty PE stands at around 20.14, which is well below its 10-year aver-age of 24.61. Similarly, the PB ratio is also lower than the long-term average. This is a clear signal that large caps are now reasonably valued.
For long-term investors, this is a green light. This could be the right time to start accumulating large caps again. Slowly, steadily, and with confidence.
What About MID & Small CAPS?
Even though they've seen a sharper fall, valuations in this space are still high. This means we need to be a bit more careful. Instead of investing a lump sum, the better strategy here is to go in with a Systematic Transfer Plan over the next six months. This way, if the market falls further, you're buying at even better prices.
Mid and small caps have high growth potential, but they also come with higher risk. So, go slow. Be systematic. Let the volatility work in your favour.
Mid and small caps have high growth potential, but they also come with higher risk. So, go slow. Be systematic. Let the volatility work in your favour.
Should You Look at Global Markets?
Yes, absolutely. US markets have also corrected significantly. For Indian investors, this is a great time to consider diversifying globally.
Again, the smart way to do it is through a Systematic Transfer Plan. Spread your investments over time. This protects you from timing risk and gives you access to global opportunities at a lower cost.
Again, the smart way to do it is through a Systematic Transfer Plan. Spread your investments over time. This protects you from timing risk and gives you access to global opportunities at a lower cost.
What's Happening With Gold?
Gold has had a strong run recently, outperforming equities in the short term. But that doesn't mean it's the best place to put new money right now.
In fact, gold is currently one of the most overvalued asset classes. If you're buying it for personal reasons like weddings or family events, that's fine. But as an investment, fresh allocation to gold should be avoided for now. And if gold has taken up a large portion of your portfolio, this is a good time to reduce your exposure and rebalance.
In fact, gold is currently one of the most overvalued asset classes. If you're buying it for personal reasons like weddings or family events, that's fine. But as an investment, fresh allocation to gold should be avoided for now. And if gold has taken up a large portion of your portfolio, this is a good time to reduce your exposure and rebalance.
Final Thoughts
- Yes, markets are falling. Yes, the noise is loud. And yes, your portfolio might not look pretty right now.
- But no, this is not the time to panic.
- This is the time to pause. Reflect. Realign. Because when markets fall, emotions rise. And decisions made in fear often lead to regret.
- If you'd like to understand why emotions can be your biggest enemy during times like this, I strongly recommend reading the article "The Behaviour Gap: Why Investors Often Lose to Their Own Emotions". It explains the psychology behind investor decisions and how you can avoid falling into the same trap.
- So stick to your strategy. And most importantly, use this time wisely. Opportunities are rarely obvious when they appear. They only look obvious in hindsight.
- You have a choice to follow the fear, or to follow the plan. Which path will you take?