Moneycontrol
Last Updated : Oct 11, 2018 01:21 PM IST | Source: Moneycontrol.com

Sensex's 1,000-point plunge: Should investors sit tight or deploy cash?

In these uncertain times, it is prudent for investors to become slightly cautious and diversify holdings, feel experts.

Kshitij Anand @kshanand

After a 1,000-point fall in the S&P BSE Sensex in early trade on October 11, investors are bound to feel the jitters. The BSE benchmark index has seen a fall of 5,000 points from the record high of 38,989 seen in August.

Keeping in mind the volatility, the next big question is – should I be putting money into markets at current levels or hold on till stability returns?

In these uncertain times, it is prudent for investors to become slightly cautious and diversify holdings. Recently, both Sensex and Nifty broke crucial support levels and there is a possibility of further decline.

Hence, investors should not be adventurous and at best put in bank fixed deposits, suggest experts.

"I don't think you should be putting more money in market now. The debt yields are not bad at all. In hindsight, three-year debt yields are not going to be better than equity returns. You are getting 8 percent as FD rates, sit quite with it, let this whole thing settle down," Ajay Srivastava, MD, Dimensions Consulting, told CNBC-TV18.

Indian market is clearly in a bear grip and the reasons are both global as well as local. Falling rupee, the rise in crude oil prices, rising concern of trade war and most important, concerns over aggressive rate hike by the US Federal Reserve which has pushed US Treasury Yields above 3 percent.

Rise in the rates by the US Federal Reserve could also force the Reserve Bank of India (RBI) to go for successive rate hikes.

"Thursday’s market sell-off is part of the global sell-off triggered by the sharp cut in the mother market the US. When the market is highly valued, some trigger can bring it down. In the US, the economy is doing very well, so much so that inflation has started creeping up. The US 10-year bond yield, the risk-free asset in the world, is around 3.15 percent. This is triggering capital outflows from EMs like India," VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told Moneycontrol.

In India, though the Nifty has corrected by more than 10 percent from the peak and the broader market has suffered deep cuts, even now valuations are not cheap.

Vijayakumar further added that investors need not rush in to buy, and they should watch the situation, wait for the market to stabilise and then start investing in large cap blue chips in a calibrated manner. Investors should also not panic and stop their SIPs.
First Published on Oct 11, 2018 01:16 pm
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