The global market decline is due to concerns about a potential US recession and escalating tensions in the Middle East. However, the Indian economy remains strong, and experts advise Indian investors to stay invested, particularly in large caps. Despite Monday’s sharp fall, there is no need for Indian investors to panic, as the current market downturn is driven by global issues and does not reflect any underlying problems in the Indian economy, according to market players. While there was a significant correction in Indian benchmark indices and sharper declines in several global markets, experts emphasize that Indian investors should exercise caution in their investment decisions and adjust their expectations for future equity investments.
The fall in global markets can be attributed to worries about global growth and ongoing geopolitical developments. The US jobs report and escalating tensions in the Middle East, particularly after the assassination of important Iran-backed figures, have significantly impacted global markets. The risks associated with rising interest rates in Japan and a stronger yen have also contributed to the unwinding of carry trade, potentially affecting global equities, including Indian equities. Despite the sharp declines seen in various global markets, Indian investors need not be overly concerned, as the current market conditions are not reflective of any issues with the Indian economy, other than the fact that the markets had become expensive.
The Indian markets have experienced a significant increase over the past 12-15 months, so the recent correction should be viewed as a healthy adjustment by investors. Long-term investors are advised not to worry and to maintain their positions in the market, according to a fund manager at a prominent mutual fund. The President and Chief Investment Officer (CIO) Equities of Edelweiss MF, Trideep Bhattacharya, noted that the equity markets are responding to economic weakness, particularly due to disappointing earnings from some US consumer-focused companies. It is important for investors to closely monitor these developments in the upcoming months. In light of the current situation, investors should avoid panic-selling and refrain from day-trading and speculative positions in the futures and options segment.
It’s crucial for retail investors to be cautious during these times of global uncertainty to avoid potential losses from speculative positions in the market. Additionally, it’s advisable for investors to focus on large cap companies rather than betting on small and mid cap companies during a correction. Although the Sensex experienced a nearly 3% decline on Monday afternoon, it’s noteworthy that the mid and small cap indices at BSE were down 3.9% and 4.4% respectively. Experts recommend gradually allocating funds to large cap schemes during this period, with a reminder for investors to exercise caution. Due to global uncertainty, investors are advised to allocate funds only to large cap funds or companies, avoiding mid and small cap funds and equities due to specific concerns in those areas, as stated by the CIO of a leading fund house. While equity investments have yielded significant returns in the past, it’s important for investors to moderate their return expectations and adjust their allocations towards equities over the next 9-12 months, with the hope of reaping benefits over the next 3 to 5 years, according to Naha.
