Financial markets have seen a lot of ups and downs in the last few months. As of February 7, 2025, the Nifty has fallen by about 10 percent from its record height of 26,216. The Nifty Next 50 has declined 18 percent. The midcap 150 index has fallen by about 12 per cent from its all-time high. Correction in market bicycle is natural. However, the decline has been quite difficult during this. There are many reasons for this. The earnings of companies have seen lethargy in growth. Valuation is high. Bond yield has increased due to the decrease in the interest rate reduction in the US. Geopolitical tension remains.
To face this atmosphere of uncertainty in the market, it is necessary to understand the situation properly. The fourth quarter results of many companies have been weaker than expected. There is a concern about recovery in the short term. Due to this, FY25’s estimate of earnings growth is being reduced to below 5 per cent. Since the announcement of the package in China, foreign institutional investors (FIIs) have been allocation for China. This trend has increased, especially since the presidential election in the US. US President Donald Trump’s policy is about to support the American economy. For this, he has announced to increase the tariff. This has also affected the markets.
The rupee has fallen by about 4 percent against the US dollar in the last months. The US dollar index has climbed 3 percent. Trump’s policy to increase economic growth and reduce trade deficit is likely to continue in the dollar. This means that the pressure on the rupee will increase. Benjamin customer once said, “The market in the short term is a voting machine, but in the long term it is a waveing machine (weight measuring machine).” During correction in the market, negative things remain in focus, while positive things in the market are in focus. However, history suggests that markets recover from shaking.
Looking at history, it shows that midcap and smallcap stocks have a greater impact during correction. This has also been seen in this decline. The Nifty Next 50 stocks have declined sharply compared to the largecap index. Midcap and smallcap stocks quickly recover from loss when recovery starts. For example, since the 2020 market crash, the Nifty doubled from her peak before Kovid, while the midcap index was tripled.
Many things are going to increase hope. Since every month, more than 26,000 crore is being invested from SIP. This is a sign of changes in financial savings in India. This domestic investment has given a big support to the market during ups and downs. India’s growth story is going to continue in the long term. There are many reasons for this. Youth has more share in the population. People’s interest in digital transactions is increasing. Therefore, this decline in the market is a big opportunity for long -term investors.
You have to take care of these things
Instead of investing outright at a lower level in the market, you should invest slowly during the next 4-6 months. This will reduce the average cost of investment. Correction gives investors a chance to review asset allocation. You can increase investment in largecap for stability. You should invest in shares of companies with strong balance sheets and cash flows. You have to maintain discipline in the market.