Investor sentiment on Dalal Street has become increasingly cautious Nifty has fallen over 10 percent from its all-time high of 26,277, while the Sensex has fallen over 8,500 points from its peak. Although an official bear market is defined by a 20 percent drop from recent highs, retail investor portfolios are already showing signs of significant distress.

Indian markets continued their downward trend on Thursday, November 14, marking a sixth consecutive losing session. Despite a positive opening, indices were weighed down by weak global cues, a rally in the dollar index, a depreciating rupee and ongoing selling by foreign investors. The Sensex fell 266 points, or 0.34 percent, to 77,424.81, while the Nifty shed 116.25 points, or 0.5 percent, to settle at 23,486.10. Both benchmarks remain more than 10 percent below their record highs from September, with the indexes shedding more than 4 percent in just those six sessions.

This is the most significant correction since March 2023. Despite domestic institutional investors retaining faith in India’s growth story, foreign institutional investors (FIIs) have pulled back from Indian stocks. This trend is driven by the allure of China’s market, where lower valuations and stimulus measures have attracted global attention.

In addition, the market is exacerbating concerns, it Q2 results the season saw a notable increase in corporate downgrades, the highest since the start of 2020. The results underscored a link between current earnings trends and high market valuations, suggesting that near-term earnings performance may not be sufficient to justify previously optimistic stock pricing. This has further reinforced caution and contributed to the recent wave of selling.

Navigate the inherent volatility of the stock markets can be challenging for investors, especially when it comes to making sound investment decisions in the short term. Neeraj Chadawar, Head of Fundamental and Quantitative Research at Axis Securities, emphasizes that while returns in equity markets are nonlinear and unpredictable in the short term, equity investments can yield significant gains in the long term due to the power of compounding. To achieve long-term success, Chadawar shares strategic insights aimed at helping investors effectively manage market fluctuations.

Stock markets, known for their non-linear and volatile nature, often pose challenges to investors looking for short-term gains. According to Neeraj Chadawar, the way to navigate these uncertainties lies in adopting a long-term perspective. He explains that while the short-term direction of the market is difficult to predict and timing the market can be one of the most daunting tasks, the key to long-term success is staying invested over time.

Investment strategies

To manage volatility and maximize long-term gains, Chadawar outlines four key investment strategies:

Invest systematically and focus on the long term: Predict the beginning of a the market crashes or an increase is almost impossible due to fluctuating market sentiment. Chadawar recommends a systematic approach to investing rather than a lump sum investment. Gradually building a portfolio over time can help mitigate the effects of sudden market changes and lead to better long-term results.

Define goals and use risk management: Long-term wealth creation requires clear, defined investment goals. Chadawar advises setting specific short-term and long-term goals to help determine an appropriate mix of asset class based on one’s risk profile. During periods of market volatility, sticking to these defined goals and maintaining a disciplined approach can prevent impulsive decisions and ensure sustainable growth.

Practice asset allocation: A well-balanced asset allocation the strategy is crucial for managing the risks associated with individual asset classes. Chadawar emphasizes that diversifying investments across different asset types can help reduce the impact of market downturns and cushion the portfolio during periods of sudden corrections. Asset allocation acts as a tool to manage volatility and improve long-term portfolio resilience.

Keep calm and avoid panic selling: Market declines often trigger emotional reactions influenced by negative news, which can lead to impulsive decisions. Chadawar emphasizes the importance of staying calm during such periods. “A diversified one portfolio with quality stocks will help you withstand volatility more successfully, he says. Resisting the urge to panic sell and maintaining composure can help investors weather temporary market fluctuations and stay on course toward their long-term goals.

Volatility in equity markets can be scary, but as Neeraj Chadawar of Axis Securities points out, long-term success is rooted in discipline, strategic planning and a focus on sustainable investments. By following systematic investment practices, setting clear goals, maintaining appropriate asset allocation and avoiding emotional reactions, investors can navigate market challenges more effectively and reap the benefits of compounding over time. Embrace these strategies ensures that investors remain well positioned to achieve their financial goals amid an ever-changing market landscape.

Disclaimer: The views and recommendations above are those of individual analysts or brokerage firms and not of Mint. We advise investors to check with certified experts before making any investment decisions.