Amid the ongoing market downturn, Zerodha co-founder Nithin Kamath has a message for investors: don’t panic. In a post on X, he highlighted how this is the first real correction for many who started investing after the pandemic, reminding them that markets are cyclical and that steep declines were inevitable after the rally from late 2020.
“I don't know how good the data is, but it seems like the number of investors stopping their SIPs has gone up. This is the wrong thing to do. What an SIP helps you do is to average your investments across different market cycles,” Kamath wrote.
Kamath shared detailed insights into how different segments of the market have performed during the ongoing downturn:
Nifty 500 Drawdowns: The majority of stocks in the Nifty 500 index have experienced a 25-35% drawdown, with the most common range being 25%-30%. Only a small number of stocks have suffered extreme losses (greater than 50%).
Sector Performance: The Construction (-40.3%) and Forest Materials (-39.5%) sectors have been hit hardest, while defensive sectors like Healthcare (-24.8%) and Construction Materials (-18.4%) have been relatively resilient.
Thematic and Sectoral Indices: The Nifty India Defence TRI (-36.32%), Nifty Media TRI (-33.55%), and Nifty Energy TRI (-30.88%) have taken the biggest hits, whereas Nifty Bank TRI (-10.36%) and Nifty IT TRI (-13.19%) have seen smaller declines.
Kamath emphasized the importance of staying invested through downturns. “You averaged on your way up from 2021; now, you get to average on the way down. In 2020, large, mid, and small caps fell by 25-40% but then rose by 200-400%. If you had panicked, you would have missed the rebound,” he noted.
He also cautioned against leverage, warning that borrowing money to invest can push investors into panic-driven decisions. “I've no idea where the markets go from here, and neither does anyone. What I do know is panicking now is the wrong thing to do, and you can get pushed to panic if you have borrowed.”
For those feeling nervous, Kamath’s advice is straightforward:
“You are better off just investing every month and doing something useful in life than getting carried away by the doom and gloom,” he concluded.