Market Falling Hardest in 29 Years—Real Talk on What You Should Do Now" 🔥
A clear, practical, and personal roadmap for traders and investors to navigate and thrive during these tough times.
Hey,
I know how challenging and tough the markets have been for the last 5 months. The Indian stock market has experienced its longest 5-month losing streak in the last 29 years, erasing around ₹82 lakh crore in market capitalization.
This sharp decline has heavily impacted retail investors, curbing consumer spending and posing threats to the economy. Nifty & Sensex have dropped about 14% since September, while mid-cap and small-cap indices have fallen over 20%.
If your portfolio is hurting, trust me—you’re not alone.
I want to openly share how to cope mentally and practically with such brutal market phases because I know exactly how you feel, first, let’s start with knowing the reasons for the crash so we know what’s happening.
Why Are FIIs Exiting India? The 3 Big Reasons 📉
Foreign Institutional Investors (FIIs) have been pulling out of Indian markets aggressively, adding to the recent crash. Here’s why:
1️⃣ China’s Market Looks More Attractive – With economic stimulus, lower valuations, and easing regulations, FIIs are reallocating funds from India to China, seeking better growth opportunities.
2️⃣ US Treasury Yields Are Rising – Strong economic growth in the US and higher treasury yields have made American assets more appealing, leading to capital outflows from emerging markets like India.
3️⃣ Indian Stocks Were Overvalued – After a strong rally, many Indian stocks became expensive compared to global markets. FIIs have been profit-booking and shifting to undervalued regions.
This FII exit is a major reason behind the ongoing sell-off, but it also presents opportunities if you know where to look.
Swing Traders: Stick to Technical Rules, Not Hopes 🙅♂️
Most swing traders, when markets fall, emotionally hold onto losing trades, hoping they'll bounce back someday. Let me tell you from my experience—hope is not a trading strategy.
Always follow clear, predefined trading rules:
Respect your stop-loss: Never shift or cancel a stop-loss hoping for miracles.
Trail your stops: In case you entered long trades looking at quick recovery move, use trailing stops to protect profits in profitable trades or minimize losses.
Technical Re-evaluation: Evaluate your trades technically. Is the stock still above a strong support? Has it breached critical technical levels like 50 or 200-day moving averages or broke key demand zones etc?
When I strictly follow these technical rules, it gives me immense psychological relief, clarity, and control—no matter how severe the fall.
SIP Investors: Double Your Courage, Not Your Fear 💪
Right now, many people are stopping SIPs because they see negative returns. Ironically, stopping SIPs during market corrections is the worst thing you can do.
Here's a personal hack:
If markets correct 10%, try to double your SIP amount.
For every further 5% dip after that, consider adding lump sums in fundamentally strong mutual funds.
This strategy might initially feel uncomfortable (trust me, I felt it too), but when markets inevitably recover, your portfolio grows significantly faster due to lower average entry prices.
When to Exit Weak Stocks 🛑
If you’re investing long-term, every major correction is the right time to clear out fundamentally weak stocks. This is tough because psychologically, accepting losses is painful.
Ask yourself clearly:
Does the company consistently lose market share?
Has revenue declined steadily in the last 3-4 quarters?
Does management frequently fail to deliver on promises?
If yes, exit. It hurts temporarily, but staying invested in weak stocks hurts permanently.
Protecting Your Portfolio: Options as Insurance 🛡️
The whole purpose of options and derivatives is to hedge risk. Here are simple ways to protect your portfolio:
Bear Put Spreads & Bear Condors are a great way to control the downside risk of your portfolio.
Beta-Based Hedging: Clearly calculate your portfolio’s beta (volatility) relative to Nifty / Sensex and create positions accordingly, you can use the TickerTape website to link your portfolio and check your Beta.
The peace of mind hedging gives you is priceless.
Your Mindset Matters Most—Here’s How to Manage It 🧘♂️
Experiencing a 30%+ fall isn't easy psychologically. Here’s what practically helped me:
Accept the market clearly: Understand clearly, that this fall is part of the market cycle, not personal failure.
Take frequent breaks: Constantly checking your portfolio won’t change reality. Log out, breathe, and take breaks regularly.
Speak openly: Engage with friends or fellow traders. The realization that you're not alone significantly eases emotional stress.
Years ago, during my early losses, this exact emotional approach helped me survive financially and mentally.
Historical Crashes Teach Valuable Lessons 📖
I studied past market crashes (2008 financial crisis, 2020 COVID crash). Investors who succeeded:
Stayed calm, and invested regularly.
Avoided panic-selling high-quality assets.
Used opportunities to rebalance their portfolios, exiting weak assets.
You must mentally and practically embrace these lessons to succeed during this downturn.
Debt Allocation: Your Secret Advantage 💡
A simple yet powerful strategy:
Maintain a certain percentage clearly in debt funds or cash equivalents.
Gradually shift funds from debt to equity during corrections.
The irony is everyone waits for corrections during bull markets, yet fear stops them from investing when corrections come. Don’t let short-term emotions impact your long-term goals.
Expert Insights:
Renowned investor Vijay Kedia advises: "Make bear markets your friend. History tells us that people have made big money by buying stocks in the bear markets."
He also cautions against overconfidence during bull markets, stating: "In a bull market, a beginner becomes an analyst, chartist, advisor, economist, and genius in 7 days. In a bear market, a genius becomes a beginner in 7 hours."
Also, Radhika Gupta (CEO, Edelweiss Mutual Fund) said, “When markets are fearful, that’s precisely when disciplined investors create long-term wealth.” I resonate strongly with this insight.
Sector Insights: Navigating the Turbulence 📊
The recent downturn has impacted various sectors differently:
Information Technology (IT): IT companies, which get a substantial portion of revenue from the United States, were the worst hit this week as the index tumbled 4.5%.
Mid and Small-Cap Stocks: These segments have faced significant declines, with indices dropping over 25%, reflecting its high-risk nature.
Historically, sectors like Pharmaceuticals, Fast-Moving Consumer Goods (FMCG), and Information Technology (IT) tend to rebound quickly after major crashes.
Final Thoughts: You’re Not Alone 🌟
Corrections hurt. But clearly understanding that they’re temporary and psychologically preparing yourself makes a huge difference. You’re truly not alone—millions, including myself, are going through this with you.
If you feel stuck or stressed, reply directly to this email. Let’s navigate this phase calmly and wisely.
Stay strong, stay disciplined,
Arun Bau
(Chartered Accountant & CFA Level 3 Cleared)