Sensex tanks over 1,000 points; 10 things to keep in mind when stock market crashes

Investors on Dalal Street lost over Rs 8 lakh crore on Tuesday as the benchmark BSE Sensex tanked 1,053 points following heavy selling in blue-chip counters. The 30-share index closed at 70,370.55, down 1.47 per cent.

As a result, the overall market capitalisation of BSE-listed companies declined to Rs 366.06 lakh crore on January 23 from Rs 374.41 lakh crore on January 20. With a fall of 5.87 per cent, IndusInd Bank emerged as the top loser in the Sensex pack.

It was followed by State Bank of India (down 4.19 per cent), HUL (down 3.18 per cent), HDFC Bank (down 3.45 per cent) and Bajaj Finance (down 3.16 per cent). In the broader space, Zee Entertainment and IRCON tanked 32.73 per cent and 13.98 per cent, respectively.

In light of this market meltdown, it is crucial for investors to stay composed and remember a few basic strategies to protect their wealth in case of any further volatility going ahead.

Don’t Panic: Reacting impulsively can lead to grievous mistakes. A market downtrend is a norm, and it’s essential to keep a calm mind and consider the larger picture.

Diversify: A diversified portfolio balances risk across sectors. These crashes stress the need to diversify your investments easily.

Avoid rumours: Always fact-check any information you receive. Misinformation can lead to disastrous investment decisions.

Stay invested: If you have invested in quality stocks, hold on to them. With time, these stocks are likely to regain their potential.

Evaluate your portfolio: A crash is an opportune time to audit portfolio performance, fix the loopholes and reallocate your investments.

Cash reserve: Always have a cash reserve for times like these. It will not only safeguard you from crisis but provide an opportunity to buy quality stocks at lower prices.

Brush up on basics: Revisit investment basics as understanding the underlying dynamics of a market crash will help you turn obstacles into opportunities.

Consult a financial advisor: Professional advice can provide an unbiased perspective and help you understand the situation better, making it easier to make informed decisions.

Think long-term: Remember, investment is a long-term affair. Short-term market fluctuations don’t affect a well-diversified portfolio in the grand scheme of things.

Learn from mistakes: An efficient way to handle market disasters is by learning from past mistakes. Each market downturn is a lesson, and it’s up to us how we interpret and apply those lessons for future moves.

However, while sharing his views on Tuesday’s selling, Prashanth Tapse, Senior VP (Research), Mehta Equities said, “Today’s slump could be due to mixed earnings outcome so far and higher valuation worries. There are indications that rate cuts in the US may not happen soon because of inflation playing truant there, and hence investors are getting uncomfortable with the current valuations. Although India’s growth prospects for the year appear positive, slowdown in China and other developing countries may lead to demand slowdown and push investors to curb their equity exposure going ahead.”

Also Read: Byju's net loss soars to Rs 8,245 cr in FY22, revenue jumps 54.2%: Report