Rupakumar Pradhan, CFPCM, CWM®

Personal Financial Advisor

Practical Views on Money, Finance & Life .....

2020 Stock Market Crash -What Should I Do?

2020 Stock Market Crash -What Should I Do?

2020 Stock Market Crash -What Should I Do?
April 11
19:21 2020

Sensex and Nifty recorded their highest losses ever after rising number of corona virus cases in India and the resultant lockdown in a majority of states took a heavy toll on the financial markets. The corona virus created a big impact on every part of our life and continuing.

The SENSEX crossed 42,000 mark with an all-time high of 42,059.45 at around 09:47 AM on 16th January 2020. In the month of March 2020, BSE’s benchmark Sensex closed at 25981.24 (BSE closed at 25,981.24 on 23rd March 2020) which was lowest closing in the month of March 2020 due to Covid-19 impact. In the matter of few weeks, markets fell by 38%, the fastest fall ever due to Covid-19 impact.

The market fall this time around has not been driven by any actual financial crisis or economic event.

Last Friday (10th April 2020) Sensex closed at 31,159.62.

Is this type of fall  new to Indian Stock Market? Is it the last market crash in last 40 years? Will the market behave in positive or negative way in future?  What should I do with my long term investment goals? What should I do with investment portfolio? What should I do with my comprehensive financial plan? Why is the stock market falling? How does this affect me, a normal person and non-billionaire? Will Sensex recover after this Covid-19 impact?

I don’t know when the market will recover? Nobody, and I mean nobody, can consistently predict the short-term moves in the stock markets. Even I can’t predict the market movement on daily basis. Market will behave as per the market.  Timing the market is very difficult task.

Your FAQs represents one of the most valuable questions you ask about the ongoing crash due to Covid-19.  Will Sensex recover after this Covid-19 impact? When shall market correct? How much will the market correct? How long it will take to recover?

You have lot of FAQs in your mind. Really I don’t know the answers but I have some perceptions to discuss with you all.

“Correction is Temporary! Growth is Permanent!”

Both in good and bad times, we think it would last forever. The reality is that everything is cyclical. Good times would definitely come back. All you need is patience.

Let’s check it.

Market Correction! A historical perspective!

That markets dislike uncertainty is well known and whenever we sense that coming, we shed some weight. Looking back at some of the major stock market corrections in India, most of them were driven by financial market excesses or economic disruptions of some sort, with a prolonged impact on the market sentiment. And along with the global market correction, Indian markets too paid a heavy price on every such occasion.
Whenever there was a market correction, Sensex recovered in next 1-2 years. You can see below some of the historical market correction and how the market recovered in next 1-2 years. You can see the Sensex Historical graphs for your reference.

1. During 1992 (Harshad Mehta Era)

Sensex plunged 54% in 1 year. Sensex recovered 127% in next 1.5 years.

 

 

 

 

 

 

 

2. During 1996 (Asian Crisis)

Sensex plunged 40% in 4 years. Sensex recovered 115% in next 1 year.

 

 

 

 

 

 

3. During 2000 (Tech Bubble)

Sensex plunged 56% in 1.5 years. Sensex recovered 138% in next 2.5 years.

 

 

 

 

 

 

 

 

4. During 2008 (Lehman Crisis)

Sensex plunged 61% in 1 year. Sensex recovered 157% in next 1.5 years.

 

 

 

 

 

 

 

5. During 2010

Sensex plunged 28% in 1 year. Sensex recovered 93% in next 3 years.

 

 

 

 

I believe that Indian markets should respond favourably once the dust settles, the fear and the panic subsides and human and economic activities are restored.

If we look back into history, we find anecdotal evidence to suggest that very sharp market falls do present an attractive opportunity for long-term investors to accumulate equities in their portfolios, provided they are willing to extend their investment horizon and ride out the intermittent volatility.

Among mutual funds, All Equity Funds NAV has declined due to this Covid-19 impact. If you want invest for long-term then your allocation to large-cap and multi-cap funds in the current fall is a better approach. You can also discuss with your financial planner regarding your investment plan.

What you need to do is simply stay the course. Don’t panic sell and make paper losses (notional losses) into permanent ones. At any cost, don’t stop your SIPs. I humbly request to avoid looking at your portfolio for some more time to come. Please remember, your portfolio doesn’t care if you look at it every day.

Your emotion or behavior would decide your investing future.

Keep calm. Believe me, this too shall pass.

“Risk comes from not knowing what you are doing.” ~Warren Buffet

Mutual funds are subject to market risk. Please read the offer documents carefully before investing.
Data Source-TradingEconomics

I am a CERTIFIED FINANCIAL PLANNERCM, CHARTERED WEALTH MANAGER®. For the moment, I have shared my experience growing up with you because it had a tremendous impact on how I do what I do.

If you have a question about your own financial situation please connect with me.  I’d be delighted to try to be of service.

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About Author

Rupakumar

Rupakumar

Mr. Pradhan has over 22 years of experience in financial services industry. He was previously working with leading Life Insurance Companies, Broking Firms, Distribution Company, Financial Planning Company and Health Insurance Company. He has cleared several NCFM modules & is also AMFI Certified. His expertise is in Comprehensive Financial Planning, Technical Analysis, Portfolio Management, Investment Advisory, Wealth Management & Business Development.

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4 Comments

  1. dganga
    dganga April 13, 00:54

    Very Insightful

    Reply to this comment
  2. Satya
    Satya April 13, 06:59

    Very beautiful Article… After reading this detail explanation I can say that

    in Bear Markets we get higher units and in Bull markets we get higher value. We win on both the occasions. Realizing this enables Wealth Creation..

    Thanks…

    Reply to this comment
    • Roop
      Roop April 13, 07:34

      Thank you very much Satya for your comment. In this Covid-19 situation, Investors should know about the market behaviour and act accodingly. Investor Awareness!

      Reply to this comment

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