Stock Market Crisis- What Should the Indian Investor Do?

The reason behind the sudden stock market Surge
 
On Monday, the stock market continued to tumble, with the BSE Sensex plummeting 1,400 points
and the NSE Nifty closing below 15,900. In addition, the Indian rupee fell to a new low of Rs. 77.01
versus the US dollar.
 
Meanwhile, despite the Russia-Ukraine conflict, crude oil prices jumped by 8.5 percent on Monday
morning. So, what went wrong with the markets, and what should investors do now?
The BSE Sensex slid 1,491 points (or 2.74 percent) to 52,842.75 at the closing bell. The broader NSE
Nifty fell 382.20 points, or 2.35 percent, to 15,863.15. Auto, bank, capital goods, finance, and realty
indexes and shares, according to reports, fell by 4.7 percent.
 
According to an OANDA report published over the weekend, the US was considering blocking Russian oil imports. Oil prices rose as a result of panic purchasing in futures markets. Russians, on the other hand, made a few last-minute requests in the Iran nuclear deal, which is nearly finalized. For India, which imports 80% of its oil, the situation will be difficult.
 
What do the experts have to say about it?  

 

With the Iran nuclear agreement at risk and the US prohibiting Russian oil imports likely to lead to higher domestic costs, Asian traders—a region strongly reliant on imported energy—pushed the panic button, according to OANDA Senior Market Analyst (Asia-Pacific) Jeffrey Halley.

As India’s import bill grows, rising oil costs will continue to drive up inflation. The rupee is anticipated
to depreciate versus the US currency even more.According to economists, India’s current account
deficit could reach 3% of GDP this year if crude oil prices average $100 per barrel.Furthermore, the
withdrawal of foreign portfolio investors (FPIs) from Indian markets has added to the strain.
 

As India’s import bill grows, rising oil costs will continue to drive up inflation. The rupee is anticipated to depreciate versus the US currency even more. According to economists, India’s current account deficit could reach 3% of GDP this year if crude oil prices average $100 per barrel. Furthermore, the withdrawal of foreign portfolio investors (FPIs) from Indian markets has added to the strain.

Before making any substantial investments, investors should wait and let the scene unfold. Buying should be limited to stocks/segments that are properly valued or have a strong earnings forecast. If the Russia-Ukraine crisis worsens, it could worsen the situation much further.

Advice for Investors 

 

Regardless of how bad the situation is, investors must maintain their composure. To liquidate investments rapidly, it is not always essential to book losses. Staying still can be beneficial at times. You may experience short-term losses as a result of the ongoing upheaval. However, it would be advantageous if you did not let this have an impact on your long-term financial planning and investing goals.

In the past, recessions, pandemics, wars, and political upheavals have all had an impact on the stock market. It has also recovered and compensated those who had remained invested. For Indian investors concerned about the Russia-Ukraine situation, here is some advice.

It is not advisable to liquidate investments rapidly in a volatile market. You may come to regret your decision once the markets recover. The desire to sell should not be based solely on a small dip. There must be more compelling reasons for the liquidation, such as achieving an investment goal or avoiding a specific risk that could severely affect you. If there are no other compelling reasons,standing your ground may make more sense. A recovery may probably happen soon. It’s best not to panic if your assets are losing money. Continue to invest in the manner that your objectives necessitate.

Diversifying your investments across asset classes is an effective method to reduce the risks associated with an anyone asset type. Depending on your financial goals, you can invest a portion of your assets in provident funds, real estate, gold, bonds, or even a bank account. Whatever the economic scenario, the right mix of investments, tailored to your specific investing goals, will keep you afloat.

In the face of adversity, your financial goals will serve as a compass. When deciding whether to keep or sell your investments, your goals should be your guide. Let’s imagine you invest in a five-year SIP and three years later something unforeseen happens, like a war. You still have two years to wait for your investment to grow or recover in that case.

In the event of a global crisis, equity markets may plummet. Investors should not, however, make a hasty decision to change their portfolio without first considering the pros and cons. Rather than knee-jerk reactions to volatility, these decisions should be guided by sound investing concepts and information. In a crisis, though, remember why you invested. You will be able to avoid making costly decisions as a result of the clarity.

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