Rupakumar Pradhan, CFPCM, CWM®

Personal Financial Advisor

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

Market Correction

Market Correction

Market Correction
August 31
13:20 2019

Some of our investors are asking about the current market correction and future course of action on this event. They are very much confident about their ‘Comprehensive Financial Plan’ which we have prepared for them. It’s a 60-70 pages written report with 4-5 hours discussion on the recommendations with alternatives.

Are you worried about current stock market correction?

Just to inform you all, in the beginning of 2018, all of you were very happy looking at your investment portfolio.

Last 14 months has changed the situation upside down.

Sensex was 33,255 in 2nd April 2018. The Sensex hit the 38,545 mark in 28th March 2019. In this period -one year, Sensex return was 15.91 per cent.  In the last 40 years, the Sensex has journeyed from 100 points to close at a level of 39,000 on 1 April 2019 and return 16.05 per cent per year.

Rs 1 lakh grows to Rs 3.9 crore in 40 years!

Now-a-days Indian equity markets (Sensex & Nifty) are more sensitive to the global information, FIIs activities, foreign portfolio investors (FPI) and fed rates etc.

Foreign investors have pulled out $ 2 billion (Rs 14,383 crore approx.) from the Indian stock market so far in July end, the highest outflow seen by an emerging market during the month, as concern on the higher taxation on FPI and continued economic slowdown has forced them to move other emerging markets to get more return.

Countries such as Thailand, Indonesia, South Korea and Japan has seen inflows to the tune of $400 million to $1.7 million. Brazil has seen the second highest outflows at $1.4 billion.

The Indian Equity markets are not displaying the positive returns due to so many factors like rupee falls, low GDP, sluggish corporate earning in June quarter end, slowing consumption, mid and small cap stocks plunge and other factors.

Corrections are normal in equity markets. It’s the characters of the market to move up side and down side.

There is nothing unusual about volatility and corrections in the equity market. This is the very nature of markets and having stayed the course even in bear markets, you are very clear about the same.

Still I feel it is my responsibility to emphasize basic doctrines of long term investing on a regular basis. As I often repeat during our discussion, my role as your financial planner is to assist you shape your behaviour towards long term investing.

Many of you have started SIPs as per the financial plan recommendations. Investors who started their SIP (Systematic Investment Plan) in equity mutual fund schemes (mid and small cap oriented schemes) three years ago are starting to see loss in investment portfolio.

The reason for three year SIPs in mid-cap funds making losses is that the investments were made when these shares were at record highs and subsequently the fell.

Since January 2018, the mid cap index has fallen 25 per cent and small cap index has dropped 40 per cent as against the 6 per cent rise in the Nifty. Many mid and small cap shares have fallen by 50-70 per cent from their highs.

It is difficult to ascertain when the investments would start showing returns as it is dependent on market conditions.

As your Financial advisors, we suggest our clients with higher risk appetite could increase the quantum of their SIPs in mid cap schemes because the valuations have become cheaper after the fall.

Now is a phase of staying invest and continuing with your SIPs as per the ‘Comprehensive Financial Plan’ to achieve your financial goals. You should invest in a long-term investment horizon as per your financial goals and you shall be rewarded.

John C. Bogle (Investor, business magnate, and philanthropist. Founder of The Vanguard Group, and is credited with creating the first index fund) said:-

Stay the course. No matter what happens, stick to your program. I’ve said ‘stay the course’ a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you.

Remember it! Always remember it!

Keep investing! Long term investing!

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” ~Warren Buffett

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



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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