New Delhi [India]: This is not a time to panic or sell your entire portfolio. Instead, experts recommend buying good quality stocks or ETFs, which have become more reasonably valued.
Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, shared his insights on the recent stock market crash.
Goel stated, “My advice is not to panic. The Nifty index dropped by almost 1,000 points in just the last two days. This is not a time to panic or sell your entire portfolio. Rather, it’s a time to buy some good quality stocks or ETFs, which are now more reasonably valued than they were last week. You should buy on every 100-point fall in the Nifty. Be a buyer in the market now. However, there is a catch: we are not advising investors to buy stocks for the long term.”
He added, “The market is too expensive to build up long-term investments. The Nifty PE ratio is still over 20, and small-cap and mid-cap stocks are trading at more than 30 PE ratios. So, this is not the time to build your long-term portfolio. It’s just a time to buy some good quality stocks and ETFs for the near term. When the market normalizes and the euphoria returns, you can consider long-term investments.”
Highlighting the reasons behind the stock market crash, Goel explained that the US economy appears to be heading towards a recession, based on recent data. Additionally, the yen carry trade is reversing due to an interest rate hike by the Bank of Japan last week.
Consequently, money that was invested in emerging markets, borrowed from Japan in Japanese yen, is now returning to Japan as the yen appreciates. This has led foreign institutions and investors to sell their emerging market assets, including equities, bonds, and currencies, to repatriate funds to Japan.
Another factor is the bubble burst in the Nasdaq 100, which has fallen from 20,800 levels four weeks ago to 17,500 levels now. US conglomerate Warren Buffett sold USD 75.5 billion worth of stock and nearly halved its stake in Apple.
These triggers, combined with the overvaluation of Indian markets, have led to a correction. Goel emphasized that Indian markets have been overextended and have not experienced a decent correction since March 2023.
He believes that the recent correction was inevitable and had been warning about unsustainable market euphoria. He advised investors to book some profits and avoid putting more money into the Indian market.
DK Mishra, another stock market expert, echoed similar sentiments. He said, “The share market is vulnerable and directly impacted by international markets. The correction in our market is due to the financial situation in the US and issues in Japan. Since our market was running at high valuations, any impact internationally has a larger effect on our share market. During such volatility, retail investors are advised to stay aside and wait for the market to settle down.”
Nirav Vakharia, another stock market analyst, also advised against panic.
He said, “Investors should not panic as the fundamentals of the Indian economy are strong. This correction is due to global reasons, including the US market, a strengthening yen against the dollar, and tensions in the Middle East. The correction was expected due to high valuations in the Indian stock market. Investors should not sell in panic.”
The stock market experienced significant losses on Monday, mirroring global trends. The Sensex plummeted by 2,222.55 points to settle at 78,759.40, and the Nifty dropped by 662.10 points, closing at 24,055.60. Out of the Nifty companies, only five saw gains while 45 saw declines, highlighting the overall bearish mood in the market.