Deciding when the Indian stock market will bounce back is not easy because many interrelated factors must fall into a play at the right moment. There is no easy answer and sadly, timing the market can be nearly impossible. Instead, we at VSRK Capital focus on giving investors tools and information to empower them in unstable markets, rather than trying to predict the unpredictable.
Factors That Determine The Recovery Of The Indian Stock Market
The stage and pace of the rebound certainly depend on a set of factors in the Indian scenario along with a set of other worldwide determinants:
Domestic Economic Expansion:
The intent of the pace of GDP growth, concerns on the inflation, interest rates set by the RBI going forward and the rate of employment growth carry high weightage. The next are in the favor of facilitating market revival-fundamentals of any economy.
Corporate Profits:
The biggest driver of guiding Indian markets, particularly for shares in prominent indexes such as Nifty 50 and BSE Sensex, are corporate profits. Strong corporate profits signal recovery and fuel optimism among investors.
Investor Sentiment (Domestic & FII):
Domestic and FII sentiment largely drives the Indian markets. While fear and risk can extend a downtrend, conversely, it can inject life into the market with a hope and fresh vigour. The sentiment is driven by overseas leads and news developments.
Monsoon Season:
Agriculture and the Indian economy rely a lot on monsoons. A good monsoon otherwise would increase rural incomes hence consumer expenditure which would help the markets take off.
Government Policies and Reforms:
The government policy, reforms, regulatory reforms, and the strong policy statements tend to cause a stock market recovery, whereas policy and reforms do signal a sentiment towards the stock markets, thereby changing investor sentiments.
Global Economic Conditions:
There are many global economic conditions that affect Indian markets such as working of key economies, international trade relation, commodity prices, etc.
Geopolitical Events:
It is also because of global events and other signs of political tensions in the neighborhood that certainty about a direction in which investors’ confidence can simply shift and therefore impact market revival takes a hit.
The Role of Long-term Thinking
Even though it is merely natural to feel apprehensive in downtrends of the market, and especially so for your very own investment, a long-term investment strategy is essential. The Indian stock market always returned in the past, though no one knows when exactly. Attempting to time the market is quite challenging and often leads to opportunities missed. Instead, invest in a diversified basket of quality Indian businesses and keep them for the long term.
Strategies to Cope with Volatility in the Indian Context:
Diversification (by Asset Class and Sectors):
Investment in a diversified basket of asset classes (equity, debt, gold) and sectors of the Indian economy (IT, financials, consumer goods) would reduce the shock in case of a downturn.
Rupee Cost Averaging:
Putting in a fixed sum of money at frequent intervals, irrespective of market movement, can result in buying more shares at low prices and fewer shares at high prices due to which your average cost per share will reduce in the long term. This applies more to the Indian market.
Concentrate on the Basics:
Concentrate on the basics of Indian firms you invest in. Look for companies which offer good earnings, with sound balance sheets, and have positive long-term growth prospects in the Indian economy.
Watch the Indian economy:
You have to closely monitor the domestic economic news, RBI moves, government policies, and even all the news surrounding the monsoon season. You must be well aware of the Indian macroeconomic setup.
Conclusion:
There is just no telling when the Indian stock market is going to return. But being well aware of market cycles, paying attention to long-term fundamentals of Indian businesses, and maintaining a sound investment discipline will keep you on track. VSRK Capital makes sure it takes the reins of weathering the volatility in the markets and gets you to reach your long-term financial objectives with reference to India.
FAQs:
Do bear markets lead to immediate recoveries?
No, the timing and magnitude of a market recovery, whether in the Indian market or any other market, will depend on a ton of factors, from economic fundamentals, investor psychology, to worldwide events.
Is it safe to invest in a falling market?
Though investment is risky, the market downturn offers an opportunity to buy quality assets at low prices. The long term perspective should be in mind while investing and investment should happen based on one’s risk appetite. If this method can be repeated during Indian market declines, rupee cost averaging would surely be effective.
