Is it the right time to invest in the Indian share market? EXPLAINED

Indian stock market: Indian benchmark indices, Sensex and Nifty, started Tuesday on a weaker note, dragged down by index heavyweight Reliance Industries and IT stocks. The decline followed losses in Asian markets after former U.S. President Donald Trump reaffirmed his commitment to implementing proposed tariffs.

At around 9:20 am, the BSE Sensex had dropped 386 points (0.53%) to 72,665, while the Nifty50 slipped 145 points (0.66%) to 21,974.

“Markets deliver asymmetric returns. There can be long periods of stagnation followed by short bursts of hyper-performance that, on average, drive returns. Missing these bursts while trying to time your entry or exit can be costly. For example, from 2019 to 2023, markets moved through cycles and delivered an average return of 18%. However, had you missed the three best-performing months in those five years, your returns would have fallen to -5%,” said Vivek Sharma, Investments Head at Estee Advisors.

What does history showcases?

The Nifty 50 index has experienced a significant decline of around 16% from its September 2024 peak of 26,277, marking the sixth-largest drop since the 2008-2009 Great Recession and the second-largest since the Covid-led crash in March 2020. This five-month downtrend, last seen in November 1996, has raised concerns about a potential bear market.

In 1996, the Nifty sank nearly 26 per cent over a five-month period, and another 6.6 per cent in December to mark the final low. It then recovered to close the month 16 per cent higher from the low point.

Brokerage firm Axis Securities in a report said that Nifty has entered a critical support zone defined by the 100-week Moving Average Envelope (+/-3%), which has historically contained declines except during extreme events like the Covid crash. This suggests proximity to some sort of a durable bottom.

Should you invest in Indian stock market at current levels?

Historical patterns suggest that extreme breadth readings often precede market bottoms, but investors should wait for confirmation of a recovery before taking positions, the brokerage report said.

Looking at previous data, March has historically been a strong month for market recoveries, with an average gain of 1.7 per cent since 2009. The Nifty has never recorded six consecutive months of declining prices in history, suggesting a potential rebound.

“The current market environment exhibits signs of excessive pessimism and fear – not without reason – which are often precursors to durable bottoms. While a clear bullish trigger is yet to emerge (this is critical), historical patterns, technical indicators, and sectoral valuations suggest that the market is nearing a medium-term bottom,” the firm said.

What should be your market trading strategy amid crash?

The brokerage firm recommends investors to allocate some long-term money between 21700 – 22000. “While most of us can’t catch the exact top and bottom, prudent investing is about cashing in on opportunities, especially when sentiment is so one-sided. One such opportunity is now,” it added.

Anshul Jain, Head of Research at Lakshmishree Investment and Securities suggests investors to change one’s investment strategy amid volatility.

Speaking on how to trade amid stock market crash, Jain said, “There is an opportunity when there is a challenge because geniuses don’t do different things; they do things differently. Amid the bloodbath in the stock market, one needs to change one’s investment strategy because a volatile market is not conducive to intraday trading. When the market is volatile, it’s time to become an investor and save money. Trading is advised when the market is in a bull trend or a bear trend. In a volatile market, one should invest in cash and maintain an intense stop loss after taking any position.”

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.