Hello Readers!
Last some months were full of panic situations, reasons were many, one side was COVID-19 Pandemic (still on), and the other side was the fluctuations and corrections shown by the market. The sharp equity market crash caused in mid-March this year, forced many investors, to quit their long-term investing. Well, now long term returns are looking rosy once again post the sharp uptrend that has followed.
The market trend or better say fluctuations, shown in the last few months, clarifies the nonlinear feature of the market. Many investors quit or back out from their long-term investments, after the sharp correction, but the market’s current uptrend also establishes the fact that patience in the market is what gets rewarded rather than panic.
How has the market shown uptrend?
The market has volatile nature, if it is trending low, time will come it will trend up also. Currently, the market is rallying. The word market really refers to a representative benchmark index, that comprises of the top stocks measured in terms of market capitalization.
In the Indian Equity market, this rally is represented by Nifty 50 or the BSE Sensex index. The former is a 50-stock index and the latter have 30 stocks.
Currently, both the indices have reached close to their high price, after the sharp market crash in March. And the fact is the stocks which have led them there are not the same as before, which clearly shows the recovery level of an individual stock is not uniform.
For example, HDFC Bank which is part of both indices is just 9% short of its high price before the market crash and at the same time, State Bank of India is roughly 40% lower than its high price before the crash. Reliance Industries Ltd is currently at its 52-week high price.
These figures show that the market has many components and, each rally and correction shown by the market has different impacts on different components. Added to that, it's all-time impossible to predict the market trend in advance, its difficult to calculate which part of the market will have more impacts of a market correction and how long a rally can continue.
What one should do?
Currently, we can say that the market is once again, close to its all-time high, and at the same time, the risk of a correction is also high. Market trends in the last some months clarify that predicting a market movement is futile, and it is a waste of time to sit, analyze, calculate, and predict the market trend.
For those investors who backed out from their long-term Equity investment in March, now in this speedy recovery, they might have no chance to reinvest everything.
Thus, it is always advisable to investors, stay calm during volatilities, and don’t let your panic syndrome ruin your investment. Instead of predicting the market, and figure out where the market is headed and which stocks are going to be the best performers in a rally, it is always better to stay invested through the ups and downs of the market with the surety that your money is safely managed by experience and smart fund manager.
The fund manager has the ability to pick a reasonably diversified portfolio that has something to gain from in different market cycles. Staying invested during a downtrend will let you buy more mutual fund units that will help you balance out the loss in investments when the market is in an uptrend.
Last but not the least, it is always advisable, continue your systematic investment plans, despite the market noise, with a proper investment strategy, so that you can benefit your investment from both the downtrend and uptrend of the markets.
For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).