Markets have Crashed, your Confidence in Investing Needn’t

In the previous post we had said that 24500 should be the immediate support and the worst case scenario comes at around 23300-23000. You can Click Here to read the earlier post. In fact 24500 has been a huge support base since very long but on the previous trading day the Sensex has closed marginally below 24500.

Hope fully, though we may open, gap down on Monday 18/Jan/2016 on back of drubbing in American markets, it would be nice to see if the markets respect 24500 and tries to recover near to the range during the day.

The beginning of 2016 has not been good at all, even those who have been invested over last one year are in losses now, and in many cases even two year returns are not able to beat the Fixed Deposit returns! Hence nothing wrong in case, as an investor even you are in state of shock and wondering should you ever continue investing or withdraw all money and stay happy with FD’s which may give you just around 6% post tax.

Before going further, remember the famous quote from the legendary investor Warren Buffet: ‘unless u can watch your portfolio dip 50% and can still stay calm, you should not be investing in stock markets’

Another quote: ‘Be fearful when everyone is Greedy and be Greedy when everyone is Fearful’

Both the quotes are valid today, they mean don’t panic since your portfolio is down and secondly be greedy since all others around you are fearful.

This is the time when you should not be watching too much of TV, believe me you, most of the fear in you is a creation by words of anchors and analysts who appear early morning and start scaring investors. Also take my words, most of these anchors don’t invest their own money in markets and we small investors tend to take advice from people who don’t invest themselves!

Hence, it becomes very vital to take advice from an Analyst who is an Investor himself. As an Investor himself, he can understand what you need, and can feel your pain in times of bad markets since his own portfolio would also be in red along with yours!

Hence don’t panic, just wait. May be you need some strategy change while investing. I have recently coined a quote suiting every scenario and it goes like this:

While investing keep in mind, there is nothing called Short Term, Medium Term or Long Term, there is only Profit Term. – Vivek Karwa


*Iam no way encouraging Intra Day trading, will post complete explanation on the quote as a separate article.

So what is happening in the market? Why is it going down?

Before proceeding first let’s understand that Indian markets are heavily dependent on the money flows from FII’s. Due to China effect global markets are seeing outflow and hence we are in tune with them. The moment little stability emerges, we will recover faster than other markets.

Why should we recover faster? Let’s look at some numbers:

1. All currencies worldwide have depreciated against the Dollar ranging from 10% to as high as 20%. Brazilian Real has depreciated almost 31% while Indian Rupee has gone down just around 5%, this reflects the inherent strength of Indian economy. Politicians may scream that Rupee has gone to almost 68 and government has failed are just misguiding public. If we consider historical average governance, Rupee by now must be at 80 against the Dollar! Yes 80, Iam not blabbering. RBI taking Rupee to 72 would actually be a good move!

2. Japan Yen has fallen just around 3% while the Japan’s stock markets have given around 10% returns. India was down almost 10% we should recover soon since a strong currency means strong economy.

3. US is likely to grow at 2.8% for the year 2016. Also the un-employment rates have been coming down. Still US markets are also suffering due to China factor.

4. China’s growth 2016 expectation is just around 6.3% and the 2017 expectation is 6% while the 2016 expectation for India is at 7.5%, hence we will be the fastest growing economy for many years to come.

5. FII flows have been outperforming most other Emerging Markets. Till 2015 India received $3.6 Bn while EM’s saw -67.3, in the last 5 yrs India has got 63.6 Bn while EM’s witnesses -80 Bn. Money will finally find India a sweet spot soon.

6. Indian government has started spending huge amount on capex, estimates are that compared to 2010-2015 government will spend 2.5 times more in 2015-2020.

Other positive factors like dip in crude an commodities prices will also benefit our country a lot. Those things gave discussed separately in other articles.

You may have certain questions in mind, let me pre-empt them and try to answer them:

Q1. Iam invested fully, portfolio is down what should I do?

As said above, don’t panic. India is on a strong footing compared to global markets. We will be the first to recover. Over a period of time, markets tend to always give better returns.

Q2. Can I invest more here and average the stocks Iam holding?

Definitely you can buy here if you have a time horizon of at least 3 years. It is not necessary that you should average existing holdings, if the existing holdings are of good quality then you may. Take advise of an Analyst.

Q3. Iam a Mutual Fund investor, can I invest more in these funds?

Yes, you can and you should! Just ensure you are in good funds.

Q4. Iam a Mutual Funds investor can I invest in stocks instead?

Yes you can, when the recovery happens, stocks may give you faster returns, but then if you have no experience in buying stocks, don’t meddle yourself.

Q5. In the above questions, shall I invest in one go or in small parts?

No one has sure shot answer where the market would settle, so dividing your capital in 3-4 parts and investing may be a good idea.

So friends, it makes sense to invest on every dip. In year 2008 Sensex dipped from 21000 to 7800..! People at that time too thought it’s end of markets! Then we went to 30000.

Budget is approaching. I feel it will be good, BJP has to prove itself. They can’t afford to disappoint us. They have no Choice!

Buy Buy Buy

Vivek Karwa

Certified Financial PlannerCM


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