COPING WITH A FALLING MARKET

Numerous factors may trigger stock market volatility, which could result in a sharp, sudden increase or decrease in the value of your portfolio. Don't make hasty decisions about your investments

- By Narayan Krishnamurthy

September 2024 was a euphoric time for Indian investors. This was when market indicator BSE Sensex touched an all-time high of 85,978.25, raising expectations among investors who continued to increase their exposure to the markets.

Many over-optimistic investors and market experts predicted the Sensex would close the year by breaching the 100,000 level. By mid-January 2025, however, many of the same investors were rethinking their enthusiasm. The gradual, but continuous fall in stock markets is worrying investors, especially on the back of foreign investors exiting amid the fall of the rupee (see graphic). Yet, the Indian markets experienced something very different in 2024, even as FIIs were net sellers in eight months, with the highest selling of Rs a net of Rs 2.96 lakh crore, and in the same period, systematic investment plan (SIP) inflows were Rs 2.42 lakh crore. The belief in the markets by domestic investors, especially retail ones, is visible in the increasing number of demat accounts as well as rising SIP investments through mutual funds. The markets are today back to the levels they were in June-July 2024.

Naturally, this fall has caused some anxiety among investors, especially those who haven't experienced significant falls. A regime change in the US, the falling rupee against the dollar, rising inflation and many other domestic and international factors are some of the reasons that have resulted in this market correction or drop. While there is enough reason for concern, it would be unwise to take any dramatic step, especially by way of selling investments.