Don't fear market volatility, treat it as an opportunity!

Every correction in the market gives the equity investors an opportunity to make some good buy at dips and give them a chance to diversify their portfolio.

April 15, 2021 10:57 IST | India Infoline News Service
Stock market had opened this week in red amid growing fears of complete lockdown in Maharashtra and other states as Covid-19 cases continue to rise. The benchmark index Sensex plunged 1,700 points in intraday trade on Monday. Monday’s market crash has triggered worries of a scenario like last year's when nationwide lockdown had left the stock market bleeding with benchmark indices plummeting around 40 per cent in a span of two weeks.

A 7% -10% fall in markets after a 40% -50% gain is not something which should be worried about. Investors should see this as a part of market movement. The market has already discounted the worst and is anticipating the improvement in earnings in the coming quarters. The International Monetary Fund (IMF) on Tuesday upgraded its FY22 growth projection for India to 12.5% from 11.5% estimated in January, though it has cautioned that the forecast hasn’t factored in the severe downside risks arising from the country’s ongoing second wave of covid-19.

Every correction in the market gives the equity investors an opportunity to make some good buy at dips and give them a chance to diversify their portfolio. Investors should identify which stocks have strong potential and can do well in the long term. Long term investors should use this opportunity to accumulate quality stocks.

If you've had your eye on a certain stock but couldn't afford the current share price, buying it during a market downturn when its price is lower could be a smart move. In the words of Warren Buffet “Whether we are talking about socks or stocks, I like buying quality merchandise when it is marked down.”

When you're buying index funds or mutual funds, you're still buying stocks. Except instead of buying them one at a time, you're buying dozens or hundreds at once. So, when stock prices fall, you're getting more for your money.

The key to investing during a downturn is to make sure you're putting your money behind solid investments. Investors should not buy stocks because they are cheap. Instead, they should buy quality stocks that are going through a rough patch. These investments are more likely to recover from a market crash.

Market crashes can be intimidating, but they can also be good investing opportunities. By investing in solid companies at bargain prices, the investor can make the most of periods of volatility and strengthen his portfolio.

The rising Covid cases remains a matter of worry but the government is in favour of spending, which will limit the impact of a prolonged Covid crisis. The consumer sentiment is improving which is evident from rising auto sales. The Foreign Portfolio Investors (FPIs) are extremely gung ho about Indian equity markets. In FY21, Indian stock market  witnessed strong FPI inflows of Rs 2.74 lakh crore. The robust FPI flows came on the back of faster than expected economic recovery supported by multiple tranches of innovatively designed stimulus packages. And this interest of FPIs in Indian stock market is not going to die down soon.

The pace of vaccination in the country has picked up and people have again started adhering to strict Covid protocol. Covid testing is also going up and once the numbers start to fall, markets will again regain enthusiasm.  Going ahead there may be some near-term tension but most investors will look past the pandemic.

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