October worst month for D-Street: What should investors do?

NEW DELHI: India’s equity market benchmarks, the BSE Sensex and NSE Nifty50, have dropped approximately 8% from their all-time highs in just a month, sparking panic among millions of investors unaccustomed to such a sharp correction. The downturn isn’t limited to the main indices. Over the past month, small- and mid-cap indices have also plunged by more than 8% due to concerns over high valuations, with individual stocks in these segments falling by 20-30%.

Data shows that the market capitalisation of all BSE-listed firms has declined from around R479 lakh crore to R438 lakh crore as of Friday’s close, wiping out R41 lakh crore in investor wealth in one month.

Varun Kumar, a 35-year-old lawyer from Gurugram, has invested R30 lakh in defence, shipbuilding, and PSU stocks three months ago because they were hitting new highs and experts were bullish.

“Now my portfolio is down nearly 30%, and I’m thinking of cutting my losses and exiting the market,” he said. Shruti Sharma, a 26-year-old IT professional from Bengaluru, is also concerned as she invested heavily in mid-cap and small-cap schemes. “My portfolio has been declining for weeks, and I am now considering selling and moving to lower-risk assets,” she said.

With no immediate signs of a strong rebound, many investors like Kumar and Sharma are considering booking losses to avoid further declines. They feel the post-pandemic bull run may be over, and recent purchases have proven costly.

However, some see this correction as an opportunity to “buy the dip.” Market experts advise staying invested, as long-term fundamentals remain strong, and view the current phase as a temporary setback.

“For the short term, continue with your Systematic Investment Plans (SIPs) and hold your current investments as per your asset allocation. In the medium term, start buying high-quality stocks that were previously too expensive. Stagger your purchases and boost your SIPs with lump sums during market weakness,” said Vikaas Sachdeva, MD of Shriram Alternate. Sachdeva also suggested sticking to quality stocks, especially in sectors like defence and PSUs, which may take longer to recover due to their high valuations and widespread retail investment.