Why are markets falling, and what should you do?

The news

The Nifty 50 went down by nearly 2% yesterday. A mix of factors has triggered this fall, and it’s not the first time we’ve seen such a move in the markets.

But why exactly is this happening, and what does it mean for your investments?

Two major reasons Indian markets are falling:

1. Uncertainly in the middle-east:

Escalating conflicts in the Middle East–between Israel and Iran have created global uncertainty, prompting investors to seek safer investments outside equities and higher crude oil prices.
2. China:
Last week, China’s stock market was trading at 17-year lows. The Chinese government announced some packages to boost the economy, making it an attractive buy for foreign investors compared to India.

Does that mean you should withdraw your investments?

While news headlines might scream ‘market crash,’ it is important to note that so far there have been 302 days since 1st January 2001, when Nifty 50 has dropped by 2% or more!

On average, that’s about 12 times a year—roughly once a month!

If your investment portfolio is built keeping your long-term financial goals in mind, there’s no need to panic.

Despite this fact, such falls are often amplified. Here’s why.

The amplification of a normal market move:

Here’s a thing: investors don’t like uncertainty at all.

Investors want companies to deliver higher profits than they did earlier, which is a fundamental thing for the share price to go up.

But if there’s tension going on in one of the important regions of the globe, creating supply chain disruptions and increasing crude oil prices, growth seems to take a hit.

So what do investors do? They pull out money and the market falls. As more investors rush to pull out, it creates a ripple effect. The fall becomes steeper, creating a panic.

But history tells us that markets have always bounced back from geopolitical tensions and even major economic crises.

To conclude

Your investment strategy should be guided by your goals, not by the ups and downs of the market because the data shows that such dips are part and parcel of market behavior.

Yet, over the long term, the market has continued to grow, rewarding those who stayed patient.