Deepak is nervous, every morning there is a hope that the days will change from today, but it doesn’t happen. Deepak says if he had known that the year’s profits would be lost in a month, he would not have invested money in the stock market.
There are thousands of people in the country like Deepak, who were betting on the stock market for the last one and a half years, but now their patience is paying off. Only one question comes to mind: why did you choose the path of investing in the stock market? In fact, in recent years large numbers of demat accounts have been opened and most of the new investors were trying their luck in stocks. But the continued decline of the last month and a half has shaken these investors.
There was a big drop even during Covid. But during that time the participation of retail investors in the market was very less, during Covid people became addicted to the stock market, yes… it is also true that after Covid there was a unilateral rise in the market. Investors made a lot of money. When everyone makes money, retail investors also make a good amount of money. This earnings trend continued through August 2024.
Let us tell you that a lot of money has been made in the stock market in the last 3-4 years. There has been almost 200 percent rise in Nifty from the March 2020 low i.e. Nifty has almost tripled in 4 years. During the Covid period, Nifty had fallen to around 7,600 points in March 2020. From where Nifty has run up to 24,277 points in about four years.
By the way, it is said that, compared to the index, the stock has twice the growth rate. That means if Nifty rises 10 per cent, then a 20 per cent rise in the stock is possible over the same period. In such a situation, if the index has tripled in the last 4 years, then all stocks have also tripled in value compared to March 2020, and this has also happened. Especially the shares of many small and mid-cap companies have recorded an increase of more than 500%.
Stocks like Trent and Adani Enterprises are examples of this, which have given returns of over 500% in the last 4 years, both stocks are currently part of Nifty-50. There are hundreds of such stocks in the small and midcap category, which have given returns of more than 1000% in 4 years.
Now coming back to the question, why are investors like Deepak in bad shape in this crisis? In fact, all retail investors have started investing in the last year or year and a half. The portfolio of most of them has now turned from green to red, that is, the gradual gains that were made in a year and a half have now become clear, some investors’ portfolio has even turned red by 10 to 10. 15 percent. . Initially, these investors felt that the decline would stop within a day or two. Because the same thing had happened in the last 4 years. Whenever there was a drop, a strong recovery was observed after a week. But this time it’s not happening.
When Deepak was asked how many losses he was suffering, he started counting. ‘We were investing little by little, the portfolio had crossed Rs 2 lakh. There was a time when the portfolio had a profit of Rs 40,000, but now even the capital is sinking. I had invested Rs 2 lakh, now forget about the profits, the investment value has also come down to just Rs 1.80 lakh. There is a loss of Rs 20,000 even on the invested amount, so we cannot even withdraw it.
There will be people like Deepak around you, who will say the same thing that losses happen every day. In reality, there are many reasons for new investors to change their portfolio from green to red.
1. The stock market has fallen about 10 percent from its all-time high. In such a situation, most of the stocks in the small and midcap segment have fallen by more than 20 per cent. If someone’s portfolio had a profit of 20 percent until a month and a half ago, then it is natural that it is now in the red. Whether the portfolio size is Rs 1 lakh or Rs 1 crore.
2. In the last one and a half month, stocks of small and mid cap categories have fallen more than large caps, this always happens, therefore retail investors suffer more losses because most of the retail investors invest money in small and midcap stocks to earn more profits. . Are.
3. Retail investors chase headline-grabbing stocks the most, and those stocks also fall the most in a recession. Recently, the meteoric rise of railway and PSU stocks had attracted retail investors. Because in the last year and a half a lot of money has been made with this type of actions. Especially in railway and defense stocks, there was a more bullish atmosphere than expected. Now these stocks are falling further, many railway and PSU stocks have fallen 50 per cent from their peak. So it is certain that retail investors will suffer losses. Stocks like RVNL, RailTel, BEML, BEL, BDL, NHPC, IRFC, NBCC, Hudco are examples of this. These stocks are part of the portfolios of most retail investors.
4. Actually, one of the important reasons for the market decline is that shares of some mid-cap and small-cap companies had reached high valuations, now that earnings are not coming accordingly, stock correction is inevitable. Furthermore, foreign investors are also not allowing the Indian market to remain at higher levels but are selling continuously. In the last one and a half months, FIIs have withdrawn around Rs 1.30 lakh crore from the Indian market. The situation is that in the last 45 days alone, the market capitalization of companies listed on the BSE has decreased by about Rs 45 lakh crore.
In such a situation, what should an investor like Deepak do in this downturn? Market veterans always say that if the investor has a long-term view, he should not panic in case of a fall. After the decline, there will again be a boom phase. For retail investors, the dip is also an investment opportunity, where they can add good stocks to their portfolio. If someone panics and decides to sell during the fall, then that person should stay away from the market. (Deepak is a fictional character)
