Stock market crash: What should your next move be?

Stock markets all over the world, including Sensex, Nifty, Nikkei, and NASDAQ fell significantly today, as they reacted to weak US labor market data, with unemployment rates inching up to 4.3%, from 4.1% in July 2024. In response, the Nikkei 225 dipped around 4,451 points, witnessing the worst losses it has seen since 1987.

On the other hand, the Sensex plunged over 2,000 points, and the NASDAQ also slipped 417.98 points. Nifty also closed the day at 24,055.60, down by 2.68%. Closer home, the D-Street mayhem wiped of Rs 15 lakh crore worth of investor wealth in a single day.

While this might spook even seasoned investors, should this bloodbath drive you to exit the market, or is it time for you to go on a quality stock buying spree? Here's what the experts have to say

Market corrections = Opportunities

Vinnaayak Mehta, Founder, The Infinity Group, a personal finance consultancy says that given the current market downturn, it is important for investors to stay calm, and not make any hasty decisions.

"Market corrections can offer opportunities to buy quality stocks at more attractive valuations. Investors should take this time to evaluate their portfolios, focusing on long-term goals and strong fundamentals rather than short-term volatility. This period of correction may present a chance to reassess asset allocations and consider strategic adjustments", he says.

Expect low returns in the short run

Mr. Sandeep Bagla, CEO of Trust Mutual Funds advises investors to keep their return expectations low and realistic, at least in the short run. Invest only if you have a suitably long investment horizon. This will help you go through an imminent, upcoming market correction, along with helping you tide over periods of volatility in the interim.

"Markets like India, where domestic economy is like more resilient than other economies, could be less affected in the mayhem. However, you should keep systematically investing in the stock markets, and not hit brakes on your investments. Stay invested to reap benefits from growth over the long term", he explains.

Indians markets are relatively safe

As per Siddharth Alok, AVP Investments, Multi Ark Wealth-Epsilon Money Group, investors should consider buying in these dips, but only if their investing horizon is over 3 years.

"As valuations further rise, these sudden down moves might become more frequent. Equity markets returns are never linear. However, the direct impact on Indian markets remains limited; this can be seen from the overall relative strength that domestic markets are witnessing, while global markets are down 10-20%, Indian markets are hardly down 5% including today from their recent peaks", highlights Alok.

Invested heavily in small and mid caps? Time to move

During any market corrections, mid and small caps are the first in line of fire. Given that both of these segments are far more volatile, as compared to their stable, large-cap counterparts, the impact of a correction is far more visible on small cap and mid cap stocks.

As Jay Shah, Founder & CEO, Finwisor puts it, "when the markets are at rich valuations, the markets become fragile and look for opportunities to correct. The correction generally happens disproportionately-more in small caps and less in large caps".

Amidst today's rout, while Nifty50, an index of India's top 50 companies by market capitalization stumbled about 2.68%, Nifty midcap 50 was down by 3.28%, while midcap 100 plunged by 3.55%. Going a step ahead, Nifty small cap 100, a larger universe of just small cap stocks, dipped by 4.57%.

In such a situation, Shah suggests that long-term investors who are sticking to their asset allocation strategies should sit still, while those who are heavily invested in midcaps and small caps should move their investments large-cap stocks. And in case one is sitting on idle cash, this is a good time to start deploying their funds in the market.