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What can you do when markets are volatile?
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15.3
India VIX has seen a spike of more than 9%; reached 15.3 points on 12 September 2018. India VIX is an index to measure expected volatility using prices of Nifty Index Options – a derivative instrument. It thus helps quantify the sentiment on the market. VIX is an index that measures the expected price fluctuations in index options over the next 30 days. There is an inverse relationship between India VIX and markets. The current breakthrough in India VIX is likely to add pressure on the market. Read more about VIX here. Read here about why you should worry about the VIX figures.
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Publish date: 14th September, 2018
Stock markets have been considerably volatile for the last few weeks. In just past three days, benchmark indices have registered a sharp decline. Investor sentiments are affected by a combination of global economic and political factors. Rupee depreciation has also hugely impacted the securities markets. Taking into account the current scenario, we can say that Indian securities markets are facing volatility, both, domestically as well as globally.
Click here to read about market volatility that had previously occurred this year.
Here are a few tips on dealing with the current market volatility.
Buy low
Recently we witnessed a record growth in Q1 GDP data, high economic growth expectations by the IMF and World Bank and, the recovery signals shown by IIP figures. All these figures show that there is nothing wrong with the Indian economy. People continue to buy cars or consumer goods and spend money on travel within the country. Therefore, if share prices are tumbling amidst a panic across the board, it may be a good idea to buy stocks that rely on India’s economic growth. Click here to read about what current Q1 GDP data says.
Don’t panic; Stay invested
Markets are based on investor sentiments. Currently, domestic as well as global uncertainties have made the investors panic. The markets got dragged down further, as investors tried to close out their positions at any price. By looking at the historical data of SENSEX or Nifty, you will find that market marches forward in the long-run. Market volatility is inevitable and is a short-term condition. Thus, staying invested for a long period will be the wise thing to do during a volatile situation. Click here to read about the reasons why you should not be afraid of market volatility.
Defensive Stocks
Stocks of the companies that are not affected by economic trends are called defensive stocks. These stocks are safer than cyclical stocks, provide constant dividends and stable earnings. Generally, these are companies selling utility goods, weaponry, medicines and even insurance. No matter what the market condition is, consumers of these products cannot afford to cut-down these. Therefore, whenever faced with market volatility an investor should opt for defensive stocks. Click here to read more about cyclical and defensive stocks.
Currently, the global market volatility has had a contagion effect on Indian defensive stocks life the IT companies. Under these circumstances, it would be wise to do some research on the company’s business before investing even in defensive stocks.
Systematic Investing with diversified asset allocation
Still, if the market volatility scares you, invest in mutual funds and diversify your risk by investing in the different asset class. With the help of Systematic Investment Plans (SIPs), you can purchase units of mutual funds at lower prices. This can also be the right time to start investing for your long-term financial goals. Click here to know more about mutual funds.
