Bear Market Playbook: 5 Actionable Moves to Protect & Profit

📉 Markets are tough right now. What should you do?

If you’re a trader or investor watching your portfolio bleed, you’re not alone. Many have been caught off guard by the market’s extended fall. The Nifty has dropped around 14% since September, with mid-cap and small-cap stocks down even more, crossing 20% to 30% declines.

Some traders are stuck holding loss-making positions, hoping for a recovery. Others have completely stopped investing out of fear. But instead of reacting emotionally, let’s take a structured, clear approach to handling this bear market smartly.

Here’s how to protect yourself, avoid common mistakes, and even find ways to profit in this kind of market.

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1️⃣ First, Control Your Mindset—Don’t Make These Common Mistakes

When markets fall for a few months straight, the real damage isn’t just money—it’s psychology. Many traders start making emotional decisions like:

✅ Holding onto loss-making swing trades – Thinking stocks have to recover, even when there’s no technical sign of a reversal.
✅ Revenge trading – Doubling down on losses by trying to "make it back quickly" with aggressive trades.
✅ Cutting SIPs at the worst possible time – When markets are down, that’s when SIPs should continue or even increase.

🔴 What’s the fix?

• Accept that markets move in cycles. A bear market isn’t personal—it’s just part of how markets work.

• Stick to structured rules, not emotions if a stock has broken key support levels or a trendline, exit and move on if that’s what your swing trading rule says.

• Have a plan in advance. Ask yourself: If the market falls another 10%, what’s my game plan? Decide today instead of panicking later. Being prepared makes much of a difference.

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2️⃣ Swing Traders: How to Exit & Enter Smartly

Many swing traders are stuck in losing trades, hoping for a recovery that might not come. Even if the market recovers, not all stocks will bounce back. Some will continue trending down for months or even years.

🔴 How to approach this now?

• Check the stock’s technicals objectively: If it has broken a major demand level, exit without hesitation instead of hoping for a rebound.

• Never average down blindly: If a stock is weak in a bear market, adding more capital to it is like trying to put out the fire with petrol.

• Wait for confirmation before buying again: Look for clear trend reversals—higher highs, higher lows, and strong volume. Avoid buying just because a stock is down.

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3️⃣ SIP Investors: Double Your Courage, Not Your Fear

📢 This is NOT the time to stop your SIPs. In fact, SIPs work best during market corrections. Many investors regret stopping SIPs once markets recover.

✅ What you should do:

• If markets correct 10% or more, consider doubling your SIP amount instead of stopping.

• Every 5% further dip, consider adding a lump sum investment in quality mutual funds.

• Instead of fearing the fall, understand that you’re buying at lower prices, which will compound in the long run.

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4️⃣ Hedging Smartly—Not Blindly

Some traders think the only way to hedge is to buy put options. While puts are useful, naked option buying is NOT a perfect hedge.

🔴 Why?

• Time decay: If the market doesn’t fall fast enough (at least 2%+ in a week), the put premium will decay and lead to losses.

• High IV (Implied Volatility): When markets crash, option prices become expensive. Buying puts late can lead to overpaying.

✅ What’s a better hedging strategy?

• Bear Put Spreads – Buying a put option and selling a lower strike put to reduce cost and minimize time decay.

• Beta-Based Hedging – Calculate your portfolio’s beta (volatility) and hedge accordingly using index options. You can learn more about portfolio hedging here.

• Defensive Sectors Allocation – Instead of 100% equities, shift some capital to debt funds or sectors like FMCG & Pharma, which tend to be stable in downturns.

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5️⃣ Position Sizing & Liquidity Management

One major mistake traders make? Going all-in too early.

🔴 What to do instead?

• Keep some cash aside – If the market is already down 20%, don’t deploy everything at once. Keep cash for further corrections.

• Never risk more than 2% per trade – No matter how “sure” a setup looks, avoid oversized positions that could wipe out your capital.

• Gradually rebalance your portfolio – Use bear markets to slowly exit weak stocks and accumulate quality ones.

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Bonus: Which Sectors Are Expected to Rebound First?

Not all sectors fall equally in a bear market. Historically, these three sectors tend to recover first after market corrections:

1️⃣ Pharmaceuticals (Pharma) – Defensive in nature, pharma stocks tend to hold up better during market downturns.
2️⃣ Fast-Moving Consumer Goods (FMCG) – Essential products (food, household items) are always in demand, making FMCG stocks more stable.
3️⃣ IT & Tech – While they face pressure initially, once market confidence returns, IT stocks often lead the recovery.

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Final Thoughts: The Best Investors Stay Calm & Think Ahead

✔️ Corrections are temporary. But the way you react to them determines your future wealth.
✔️ Most people panic & sell at the bottom—don’t be that person.
✔️ Investors who keep their SIPs going & hedge smartly will emerge stronger.

📩 If this helped, reply and share your thoughts. I’d love to hear how you’re navigating this market.

👉 Stay disciplined, stay mindful,
Arun Bau
(Chartered Accountant & CFA Level 3 Cleared)