The Sensex, India’s benchmark stock index, plunged by over 900 points on Wednesday, wiping out more than Rs 3.2 lakh crore of investor wealth. The index closed at 70,938.06, down 1.26% from its previous close of 71,833.13. This was the biggest single-day fall for the Sensex since May 2021.
The market crash was triggered by a global sell-off, as investors feared the impact of the new Omicron variant of Covid-19 on the economic recovery. The US Federal Reserve’s hawkish stance on inflation and interest rates also added to the jitters.
The Sensex crash has left many investors worried about their portfolio value and future returns. If you are one of them, here are some tips to help you cope with the market volatility and protect your investments.
1. Don’t panic and sell in a hurry
The first and most important tip is to avoid panic selling. Selling your stocks in a hurry when the market is falling can lock in your losses and prevent you from benefiting from a possible rebound. Remember, the Sensex crash is a temporary phenomenon, and the long-term trend of the Indian economy and stock market is positive.
Instead of selling, you should review your portfolio and assess your risk appetite, investment goals, and time horizon. If you have invested in quality stocks with strong fundamentals and growth prospects, you should hold on to them and wait for the market to recover. If you have invested in speculative or low-quality stocks, you may consider exiting them and switching to safer or better-performing options.
2. Diversify your portfolio across asset classes
Another tip to survive the Sensex crash is to diversify your portfolio across different asset classes, such as equity, debt, gold, real estate, etc. Diversification can help you reduce your overall risk and cushion the impact of a market downturn. Different asset classes tend to perform differently in different market conditions, so having a mix of them can help you balance your returns and losses.
For example, when the equity market is falling, debt or gold may provide stability or appreciation to your portfolio. Similarly, when the equity market is rising, you can enjoy higher returns from your equity investments. The optimal allocation of your portfolio depends on your risk profile, return expectations and investment horizon. You can use online tools or consult a financial planner to help you create a diversified portfolio.
3. Invest systematically and regularly
A third tip to survive the Sensex crash is to invest systematically and regularly, rather than in lump sums. Investing systematically, such as through a systematic investment plan (SIP) or a systematic transfer plan (STP), can help you take advantage of the market fluctuations and average out your cost of acquisition. This can enhance your returns and reduce your risk in the long run.
For example, if you invest Rs 10,000 every month in an equity mutual fund through an SIP, you will buy more units when the market is low and less units when the market is high. This way, you will lower your average cost per unit and increase your chances of earning higher returns. Investing regularly can also help you inculcate a discipline of saving and investing, and achieve your financial goals.
4. Look for opportunities to buy quality stocks at lower prices
A fourth tip to survive the Sensex crash is to look for opportunities to buy quality stocks at lower prices. A market crash can offer you a chance to buy your favorite stocks or funds at a discount and increase your potential returns. However, you should be careful and selective while buying in a falling market, and avoid catching a falling knife
.5. Stay informed and updated about market developments
A fifth tip to survive the Sensex crash is to stay informed and updated about market developments and news. You should keep track of the factors that are affecting the market sentiment, such as the COVID-19 situation, the economic indicators, the corporate earnings, the policy actions, the global events, etc. You should also monitor the performance of your portfolio and the stocks or funds you have invested in.
Conclusion
The Sensex crash can be a stressful and challenging time for investors, but it can also be an opportunity to learn and grow. By following the tips mentioned above, you can survive the market volatility and protect your investments. You can also use the market crash as a chance to review your portfolio, rebalance your asset allocation, and realign your investments with your goals. Remember, the key to successful investing is to stay calm, patient, and disciplined, and follow a long-term and goal-oriented approach.
