Common Mistakes Retail Investors Make in a Market Correction

Indian stock markets have fallen sharply this year, although the performance is better than global markets. But many investors make the mistake of sticking with low-quality stocks in the hope that they will bounce back when the markets recover. Some investors who want to buy dips also make the mistake of stockpiling low-quality stocks that have fallen sharply in the market correction.

Market pundits say investors should use the correction to get rid of low-quality stocks in their portfolio and accumulate good-quality stocks.

“The Indian market has shown a lot of resilience compared to its global peers. However, we believe that investors should steer clear of companies that lack fundamentals, penny stocks, and stocks that are overvalued or based on news. Investors who have exposure to the aforementioned stocks should get out regardless of their profit/loss and invest in quality companies that have good growth prospects, competitive advantages and reasonable valuations,” said Parth Nyati, Founder of Tradingo.

India’s benchmark Nifty is down nearly 7% year-to-date and down around 14%, a level the index was not expected to recover any time soon.

That performance is still better than the MSCI All Countries World Index, which is down more than 16% for the year. And a Reuters poll of 30 equity strategists, conducted May 13-24, forecast BSE Sensex to recoup less than half of its recent losses and gain just 3.2% to 56,000 by the end of 2022. .

For investors looking to buy dips, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: “The market trend remains uncertain and therefore what investors can do now is buy high-quality stocks. in the medium and long term. Financials, particularly leading banks, are good buys in the medium and long term.”

Market outlook

For the Indian economy, Vijayakumar says, “high crude prices will continue to be a major headwind and sustained FPI selling, which is expected to continue, will be a major headwind for the market to recover.”

However, “there are signs that the market is stabilizing and consolidating around current levels. In the parent market, the US, there is a strong view that recession fears are overblown. The S&P 500 recovering from the 19% correction from the peak is, perhaps, a message from the market that the sharp correction is over.” (With information from the agency)

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