Significant crashes of Nifty 50 and its aftermath

by Sai Sahana N R

“The markets are too volatile this year” is probably the most used statement this year.

Have the markets been like this in the past? A big YES! But at the same time, markets have managed to bounce back each time wiping out short-term losses and reaping exemplary gains for its investors.

How has it worked out in the past?

The following are the major market crashes of Nifty 50 so far.

In each of these instances, though the market has crashed by almost 40% and more, it has managed to recover quickly, especially in the recent cases where the markets have displayed greater resilience.

What are the probable reasons for market volatility since January 2022?

  1. Omicron  outbreak – The new variant of covid plunged Indian markets from their all-time high.
  2. Russia-Ukraine crisis – The geo-political crisis slowed down global growth and caused supply chain disruptions.
  3. High crude oil prices – India imports about 86% of its oil requirements. Hence, high crude oil prices increase India’s import dependency and widen the current account deficit.
  4. Record high inflation numbers – The record high inflation numbers in some of the world’s biggest economies like the USA, Germany, and UK have caused huge fears among markets across the world.
  5. Prospect of a Recession – A recession is a decline in the GDP growth of an economy with high inflation rates causing a significant rise in prices of goods and services, thereby affecting the purchasing power of a common individual.

What should investors do about it?

The markets have always managed to remain strong in the long run. The earnings data and growth potential of Indian companies would determine the strength of our economy.

Moreover, the Indian market has relatively remained stable and has lower drawdown levels compared to its global counterparts. Hence, as a long-term investor, it is essential to

  1. Avoid checking investment returns on a daily basis
  2. Be consistent with SIPs irrespective of the market condition
  3. Add lumpsums during major drops
  4. Avoid trying to time the market
  5. Maintain an emergency reserve

Get in touch with your investment manager to benefit from active management of your portfolio during all market phases.