In this post named ‘The Stock Market Crash of 2018’, I’ll record the time log of 2018 market crash/correction. And, recommend what a long term investor can do, during such crisis.
What was the Macro situation at the time:
- Rupee has fallen to historic lows(1$=₹73.77, 5th Oct), and continues
- Oil prices are historic high in India
- There have been major issues from past few months in the Indian financial sectors:
- Most of PSU Banks have higher NPAs
- Punjab National Bank scam
- RBI rejects Yes Bank CEO Rana Kapur’s reappointment
- IL&FS debt issue
- Trade war between US and China is going on.
- Trump has commented that he’d revise the rates with India.
Though some of the above had already occurred, Indian stock markets were behaving awkwardly till it peaked in Aug 2018. Sensex and Nifty50 were gaining(thanks to few large caps in the index), while Mid-Cap, Small-Cap and Micro-Caps were collapsing. This was sufficient to suspect a major correction in near future.
24th Sep 2018:
Sensex lost 1.46%(536 points), Nifty50 lost 1.58%(175 points), Nifty Smallcap 100 lost 2.60%(179 points) and Nifty Midcap 100 lost 2.72%(499 points).
6th Oct 2018:
The carnage continued …
Sensex & Nifty further dropped during the last week.
Look at the below Sensex five day chart:
Clear sign of panic selling.
This week, 8th to 12th Oct, markets were trying really hard to pull up, but every time it seemed pulling up, there were sudden drops to pull it back towards lower value. The below image shows the same:
Advice for the long term investors:
As there are good amount of corrections in many good companies, below is my current strategy:
(1) DON’T FOLLOW THE CROWD, don’t panic sell your holdings. Just stay invested.
(2)This is for sure one of the greatest opportunity in India Market to buy your favourite, quality stock and make handsome profit over long term.
(3) Monitor your favorite stock for its price movement, and start accumulating in dips.
(4) Most important: Be patient, it may take weeks, months or even years for market to stabilize and recover.
(5) Though I’m not recommending this; I’m Just emphasising on the opportunity: These may be considered the times when someone need not know much of fundamental analysis or company valuation, and still make money by investing in popular, old, large cap companies, by following the above mentioned strategy and staying invested longer.
To be continued…
image credit: www.moneycontrol.com