Current Market Downturn Seen as Significant Buying Chances for the Long Haul: Analysts

Synopsis

Market analysts suggest that current downturns in Indian stock markets present strong buying opportunities, echoing historical trends where corrections lead to recovery. Despite a notable decline, experts encourage maintaining a long-term investment perspective.

Key Takeaways

Historical corrections often lead to buying opportunities.
Market discipline is vital during downturns.
Long-term investments typically yield positive results.
Recent sell-offs were triggered by trade war fears.
Global market responses impact local indices significantly.

Mumbai, March 1 (NationPress) Reflecting on historical downturns - such as Lehman's crash, the Taper Tantrum, Demonetisation, or Covid - these instances have consistently emerged as robust buying opportunities when viewed retrospectively, according to market experts on Saturday as Indian stock exchanges experienced a notable correction this week.

As stated by Krishna Appala, Senior Analyst at Capitalmind Research, while corrections can be uncomfortable, history indicates that in the long run, they are perceived in a similar light.

Throughout the week, the benchmark indices fell by more than 3 percent due to widespread sell-offs.

Fears surrounding an escalating trade conflict and concerns over a decelerating US economy sparked sell-offs across vital sectors, notably IT, automotive, and stocks linked to the US market.

The US plans to implement a 25 percent tariff on imports from Canada and Mexico starting next week, in addition to a total 20 percent tariff on Chinese goods.

This announcement sent shockwaves through global markets, resulting in an almost 2 percent drop in key Indian indices on Friday.

“Over the past 30 years, markets have fallen by over 20 percent in several years, yet ended positively in 22 out of those 30 years,” Appala remarked.

He emphasized that maintaining market discipline is crucial during challenging times just as it is in prosperous ones, and that achieving long-term gains is rarely a linear journey — it encompasses phases of significant downturns and quick recoveries.

Experts are of the opinion that periods of sharp declines are typically succeeded by rapid recoveries, and maintaining a long-term investment view has historically been a winning strategy.

On February 24, the Sensex fell by 857 points to close beneath 74,000, while the Nifty declined by 242.55 points, finishing at 22,553.35.

Although there was some relief on February 25, with the Sensex gaining 147 points, the Nifty continued its losing streak, dropping for the sixth consecutive session.

Investor caution ahead of the monthly derivatives expiry contributed to a mixed market performance on Thursday.

While financial and metal stocks enjoyed gains, the automotive and capital goods sectors faced pressure.

The RBI's choice to reduce risk weights on bank financing for NBFCs and microfinance loans offered support to stocks including Shriram Finance, Bajaj Finserv, and Bajaj Finance.

Nonetheless, the domestic benchmark indices concluded the week with a nearly 2 percent decline. The Nifty ended the week at 22,124.70, down 1.86 percent, while the Sensex closed at 73,198.1, losing 1.90 percent.