Ignore the Noise and Stay Invested

The recent banking crisis in the US has led to heightened volatility in markets, with NIFTY 50 falling over 6.5% from its recent peak it made in Dec’22. While the markets globally have taken a hit over the past month or so, this is not the first time we have seen such a fall. There have been numerous such instances in the past where markets have fallen due to a global reason.

We have analysed the markets over the last 15 years and have observed that there have been 11 such instances where markets have fallen by over 5% due to global or local reasons. The below table shows such instances and the subsequent 3-year return from the market bottom.

Interestingly, history tells us that such dips in markets have been great buying opportunities for investors with a medium to long term view, as India as a country is well placed and has strong growth drivers. While it may be difficult to catch the bottom, even an investment 5% above the market bottom, as per data over the past 15 years, has resulted in returns as shown in above table. Also, the current valuations (NIFTY 1 year forward P/E) are now close to the 10-year Long term Average.

Why India is well placed compared to other markets?

India as a country has long term growth drivers like:

Excellent demographics (~65% of Indian population is in 15-59 years age bracket)*
Abundant natural resources except oil / copper, etc.
Global leadership in services
Manufacturing opportunity
Low penetration of consumer goods, improving affordability over long term and large unmet needs of infrastructure
Rapid adoption of technology and ‘ a vibrant start-up ecosystem

What should one do during such falls?

Follow asset allocation - Increase your exposure to equities to maintain your asset allocation
If one is substantially invested in equities- Do nothing - continue to hold on to your existing portfolio
While the markets have fallen 6.5% from its peak, we may not know where the bottom is. One may consider investing via the systematic route to catch the average
One may also consider taking exposure to categories like large cap, flexi cap; as funds in these categories have a higher exposure to large cap stocks, which are relatively less volatile

Disclaimer: Kindly consult your professional financial advisor.

*UN population estimates

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.