This is not a time to fear the market — it is a time to learn, correct mistakes, invest wisely and prepare for future growth. (Express File Photo)
Feb 28, 2025 20:26 IST First published on: Feb 28, 2025 at 20:26 IST
The Indian stock market has recently experienced a 15 per cent correction, leading to panic among investors, particularly those who started investing in the last few years and have only ever experienced the highs of the bull market. During the last 14 years or so, there have been no declines of the kind we are seeing now, except for a few months during the Covid pandemic in 2020. For a new generation of investors who have been playing the market, including through derivatives, and who have never experienced a significant loss, the current times could well be unsettling. It must be remembered, however, that while multiple factors have together led to the present moment — like Trump’s policy impact on the global economy, domestic economic challenges, including declining private investments, FIIs selling, overvaluation of stocks, the newfound love for Chinese stock markets by global investors — this correction is not unusual.
Since 1980, there has not been a single decade without a couple of corrections in the 30 to 60 per cent range. This was what helped investors to mature. For new investors, this is the right time to learn from the past, rather than worrying about losses in their portfolio. Importantly, they must stay calm and avoid panic selling, particularly if their portfolio is already beaten down badly. Every time the market has crashed, the Sensex and Nifty have bounced back — in the past 45 years, each time the market crashed, it recouped the losses in the subsequent years.
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Lots of information on market cycles, past crashes and their aftermath is available. These show how the market recovered, what did well and what disappeared. Even during the worst financial market crisis of 2008, when the market declined by 60 to 65 per cent, it regained its previous peak in three years’ time.
If anything, this is an opportunity to review one’s portfolio and move to good quality stocks if required. In case one has invested in momentum stocks or invested based on tips which are not working, then this is the right time to make a correction. Borrowing to invest is a bad idea, even if stocks are available at much cheaper rates, unless one is a seasoned investor. There should be no disruption or discontinuation in systematic investment plans — in fact, this is the time to top up.
Exiting during a market decline is not a good idea unless one is certain that the stock was bought using speculative tips and has poor fundamentals or if there is an unfortunate change in long-term goals. If investment is in high-quality businesses, staying invested is the best strategy.
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Will the market fall further? This is a question that might be bothering a lot of new investors. Apart from learning from history, these investors must stagger new investments in quality stocks and use this as an opportunity, if cash flows permit. One needs to remember that the market is driven by greed and fear and hence can always be irrational. As age-old wisdom dictates, it takes the intelligence of one person and the patience of nine to achieve sustainable success in the market.
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The Indian economy is fundamentally strong and hence the markets will bounce back. Corrections are good for the market as well as for investors as they open a new window of learning that can help investors mature and become wiser in their choices. Those who let the fear of these corrections drive them out of the markets now will only lose out.
Stock market corrections separate the impatient investors from the long-term winners. This is not a time to fear the market — it is a time to learn, correct mistakes, invest wisely and prepare for future growth. Investors can turn market declines into wealth-building opportunities for the future.
(The writer is Chairman and Managing Director of Geojit Financial Services)
