Synopsis
Market analysts believe that recent downturns in Indian stock markets, reminiscent of past crises, represent strong buying opportunities. Historical trends show that significant corrections often precede robust recoveries, making it essential for investors to maintain a long-term perspective despite current market challenges.Key Takeaways
- Recent market correction offers buying opportunities.
- Historical data supports long-term investment strategies.
- Significant declines often lead to rapid recoveries.
- Market discipline is crucial during downturns.
- Investors should remain cautious yet opportunistic.
Mumbai, March 1 (NationPress) Historical market downturns -- such as during the Lehman Brothers collapse, the Taper Tantrum, India's demonetisation, or the Covid-19 pandemic -- have consistently emerged as compelling buying opportunities in retrospect, according to market analysts on Saturday. This comes as Indian stock markets experienced a sharp downturn this week.
Krishna Appala, a Senior Analyst at Capitalmind Research, stated, “the current market decline may appear distressing, but history indicates that years down the line”, it could lead to significant growth.
This week, the benchmark indices dropped over 3 percent amid widespread sell-offs.
Concerns about escalating trade tensions and worries regarding a slowing US economy prompted sell-offs in critical sectors such as IT, automotive, and various stocks.
The US is poised to impose a 25 percent tariff on imports from Canada and Mexico starting next week, as well as a 20 percent tariff on goods from China. This announcement unsettled global markets, resulting in a nearly 2 percent fall in major Indian indices on Friday.
“Over the last 30 years, markets have experienced declines of over 20 percent in several years, yet 22 out of those 30 years ended positively,” Appala emphasized.
The analyst noted that periods of significant downturns are typically succeeded by rapid recoveries, and maintaining a long-term investment perspective has historically been a successful approach.
“Market discipline is crucial during challenging times, just as it is during robust periods. Achieving long-term returns is not a straight path; it involves phases of sharp declines and rapid recoveries,” he added.
On Monday (Feb 24), the Sensex plummeted by 857 points, closing below 74,000, while the Nifty fell 242.55 points, finishing at 22,553.35.
Despite a slight rebound on Tuesday (Feb 25), when the Sensex rose by 147 points, the Nifty continued its downward trend, marking its sixth consecutive decline.
Investor caution ahead of the monthly derivatives expiry led to mixed market results on Thursday.
While financial and metal stocks experienced gains, automotive and capital goods stocks faced challenges. The RBI's decision to reduce risk weights on bank financing for NBFCs and microfinance loans provided some support to stocks like Shriram Finance, Bajaj Finserv, and Bajaj Finance.
However, on Friday, domestic benchmark indices fell by nearly 2 percent.
The Nifty closed at 22,124.70, down 1.86 percent, while the Sensex settled at 73,198.1, losing 1.90 percent.
