In the last seven trading sessions, the key benchmark indices have been highly volatile owing to geopolitical tensions. On Friday the markets staged a comeback, BSE Sensex gained over 1,300 points at close and the NSE Nifty closed above the 16,600 mark. However, on Thursday, the global markets crashed amid reports of Russia starting a war with Ukraine. Early afternoon, Russian President Vladimir Putin announced a ‘special military action’ in eastern Ukraine. The sudden development surprised market participants and panic selling ensued. In India, too, the broader Nifty 50 fell by 4.8 per cent to settle at 16,248 while the Sensex fell by 4.7 per cent to trade at 54,530. India’s volatility index VIX increased by 30.31 per cent to close at 31.98.
Experts believe that markets are likely to remain volatile for some time. Should you also sell in a hurry to cut losses? Or, is there a better way to manage the situation, especially when the next few days are unpredictable?
Don’t Panic in Falling Markets
Volatility is the inherent nature of stock markets. Historically, too, markets have fallen in reaction to such situations—be it wars, pandemics, terrorist attacks, financial crisis, scams, or others—and then recovered. Roop Bhootra – CEO, investment services, Anand Rathi Shares and Stock Brokers, said: “Investors should not panic and avoid any knee jerk reaction to current crisis. As a strategy investors should focus on domestic oriented businesses for now.”
Consider Hedging Portfolios
Ajit Mishra, vice president- research, Religare Broking Ltd., said: “Investors may consider hedging their portfolios by investing in other asset classes. For instance, gold tends to outperform during time of uncertainty and acts as a natural hedge. Within the equity space, one can focus on defensives like healthcare and pharma.”
Invest Systematically
As the markets crashed yesterday due to the news of outbreak of war, you might have thought of buying during the dip. So, to make sure that you effectively bring down your average rupee cost of investments, buy in a small systematic way rather than going all in within one day. Use this fall as an opportunity to buy systematically.
“Market falls like this offer excellent opportunities for investors. Use a staggered approach to invest idle cash as markets are likely to remain volatile for the next 6-8 weeks. A good investment strategy could be to park idle funds in arbitrage funds or liquid funds and use STP (systematic transfer plan) to transfer to index funds or other equity funds based on your risk appetite,” says Piyush Nagda, head- investment products at Prabhudas Liladher, a financial services company.
Follow a Wait and Watch Strategy
Ravi Singh, vice-president and head of research- Shareindia, said: “It is advisable that all investors should follow a wait and watch strategy and avoid any fresh entry at the current juncture. Long term investors having an investment horizon of 3-5 years will get a good opportunity to avert their portfolio, once the global situation stabilizes.”
Top Up your Equity Holdings
Deepak Jasani, head of retail research, HDFC Securities, said: “Investors who are not adequately invested in equities can take this opportunity to top up their equity holding either by lumpsum investment or SIP.”
Invest in High-Quality Stocks
Vikas Jain, senior research analyst at Reliance Securities, said: “Investors should realign their portfolios with high-quality large-cap stocks in sectors like private banks, IT, Pharma and reduce commodity facing sectors as they are on the boil and could face more uncertainties in terms of earnings.”
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
Read all the Latest News, Breaking News and Assembly Elections Live Updates here.
,