Will Nifty enter bear market with 20% correction? What Should investors do?

Nifty has now tumbled over 15 per cent form its all-time high of 26,277 hit on Sep 27, 2024. The index is roughly 5.5 per cent shy from correcting 20 per cent from its peak - which in general is considered as entering a bear market phase.

The market has fallen consistently for the last five months and looks oversold with ongoing selling by foreign players with high valuation of Indian stocks and appealing US bond yields. Largecap valuations are now reasonable with banking and financial services sector looking attractive.

Things to keep in mind for Investors:

Equity Markets witness 10-20% temporary declines almost every year. Despite an intra-year decline of more than 10% almost every year, 3 out of 4 years ended with positive returns. Even if you invested right before a market crash, over long time frames the returns have still turned out to be decent

Over the Long Term (10-15 years) Equity has provided returns above inflation, Long Term Return Expectation = Inflation + 4 to 6% but 10-20% decline happens almost every year, 30-60% Decline should be a part of expectation for every 7-10 years

Follow these rules:

1. Don’t STOP your SIP in mutual funds . Go for mutual fund with larger cap bias while still allocating not more than 10-15% in small and mid-cap funds.
2. Do not sell in panic if there is a short term correction. Sell only to meet any near term goals.
3. Believe in Long term investing :Longer the time frame, lower the odds of negative Returns.
4. Invest in High Quality High Growth companies with good governance and efficient run management.
5. Focus on large caps especially BFSI, Infra, Consumption stocks
6. Be cautious on small and mid-cap segment; there may be more correction in these companies.
7. Asset Rebalancing is required now to maintain some level of diversification and asset allocation .Can build balanced portfolio with Hybrid Funds.
8. Expect debt funds to move up with yields moving down and bond prices climbing. (look at corporate and medium term bonds)
9. Gold and Silver must in asset allocation . While valuation are high , can accumulate with small quantities monthly

Robins Joseph , SEBI Regd Investment Adviser , Certified Financial Planner in Noida. Founder of MyGuide2Wealth (www.myguide2wealth.com)  specializing in wealth, investment, retirement & Investment planning  with clear aim of Spreading financial literacy and advocating on India's strong equity story