How to navigate the rollercoaster ride on Dalal Street? Here are 6 strategies to beat stock market volatility

Sensex and Nifty traded higher on Thursday, tracking positive global cues after former US President Donald Trump granted a one-month exemption on new tariffs for imports from Mexico and Canada, benefiting US automakers.

Asian markets followed an overnight rally on Wall Street after Trump softened his stance on the new tariffs. Moreover, the US dollar index slipped to a four-month low of 104.3, a development seen as favourable for emerging markets like India. Meanwhile, crude oil prices plunged to a six-month low of below $70 per barrel, boosting market sentiment after the OPEC+ alliance decided to increase output from April, a move expected to benefit Indian refiners by improving marketing margins on retail fuel.

In the previous session, the Nifty 50 index was also in the green, rising over a percent. However, before that, the index had declined for 10 consecutive sessions.

Moreover, Indian equity markets have faced sustained weakness, with indices closing lower for five consecutive months. The Nifty has fallen by 15 percent, while small-cap stocks have witnessed an even steeper decline of 25 percent.

Amid such volatility, whether the correction is over or the current rebound is temporary remains uncertain. Rishabh Nahar, Partner and Fund Manager at Qode Advisors, believes this environment offers a valuable opportunity for long-term investors to reassess and strengthen their portfolios.

Investment Strategies

He outlines six ways investors can protect themselves in such periods:

Long-Term Horizon Over Market Timing: According to Nahar, attempting to predict the exact market bottom is challenging, making investing for a long-term investment horizon—at least three years—more prudent. He notes that declining markets often lead to attractive valuations in high-quality stocks, which can deliver strong returns once sentiment improves and the market rebounds.

Historical Trends and Buying Opportunities: Market history suggests that some of the best buying opportunities arise when investor sentiment is at its lowest. Nahar highlights that when fear dominates, stocks are often available at bargain prices. Gradually increasing exposure to fundamentally strong businesses during these times can position investors for significant gains when the cycle reverses.

Avoiding Panic and Staying Disciplined: Nahar cautions against the common pitfall of panic-driven selling during corrections. He explains that while bull markets can lead to overvaluation, corrections help reset prices to more reasonable levels. Remaining disciplined and avoiding emotional decision-making, he says, are key to navigating market downturns effectively.

The Benefits of Systematic Investing: For investors confident in the long-term growth of the market, Nahar suggests adopting a systematic investment approach. Spreading investments over time through strategies like rupee-cost averaging can help mitigate volatility and ensure a more balanced portfolio rather than trying to time the market’s exact bottom.

Identifying Strong Businesses: Market downturns provide an opportunity to identify and invest in fundamentally strong companies. Nahar emphasises focusing on businesses with robust earnings, a solid track record, and clear growth potential. He believes these companies, though currently undervalued, could generate substantial returns as market conditions improve.

Managing Emotions in Market Declines: While sharp corrections can induce anxiety, Nahar advises investors to resist emotional reactions such as panic selling. Staying committed to long-term financial goals and maintaining a rational approach can help investors navigate uncertain times without making costly mistakes.

In summary, despite the ongoing market correction, Nahar views this phase as a strategic opportunity for investors to buy quality stocks at attractive valuations. By maintaining discipline, focusing on long-term fundamentals, and avoiding reactionary decisions, investors may position themselves to benefit significantly when market sentiment improves. Instead of fearing volatility, he suggests embracing it as part of the investment journey towards wealth creation.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.