Thinking of deploying Rs 100,000 in market to take advantage of fall? Here’s what to do

The Indian market plunged over 6 percent in February – worst fall since September 2018. The selling pressure also pushed Nifty50 below crucial support levels in just one week which gives rise to one important question – should one deploy money now?

Warren Buffett once said: “Be fearful when others are greedy and be greedy when others are fearful.”

This is the time to become greedy, suggest experts. However, investors should deploy capital in tranches. If someone is planning to deploy a considerable amount of money, say Rs 100,000 then he/she should not invest a lump sum amount, instead a staggered approach should be taken.

Given the fact that Nifty is trading near crucial support levels, a technical bounce back is largely on the cards. Still, the index is down by about 1,000 points from its record high of 12,400 levels, experts say.

“End of such type of events are difficult to predict. It can last for 50 days or maybe more than 100 days. The ideal strategy should be to buy in parts at each major supports,” Shrikant Chavan, Senior Vice President, Equity Technical Research, Kotak Securities told Moneycontrol.

“Invest 50 percent of available funds at current levels as the Nifty is down by almost 800 points. Buy balance around 11,000 Nifty level if correction extends,” he said.

Nifty has corrected by about 8 percent (11,400 Nifty levels) from highs of 12,430 in January 2020. It would be better for investors to wait for some more time before picking up stocks for the long term, at least till there is further clarity and stability with respect to coronavirus.

History suggests that there is no clear pattern between diseases and the stock market falls, but one thing is certain that long-term investors do get a window of opportunity to deploy cash.

“Any sharp market correction because of any uncertain event like global epidemics, including the outbreaks of SARS in 2003, and Zika virus in 2016 has been a good investment opportunity,” Pankaj Pandey, Head – Research, ICICI Direct told Moneycontrol.

“Historically, it has been seen that market recovery in such cases is sharp. In other words, when the market is already factoring in the risk, the best course of action is to buy the dip,” he said.

Pandey further added that epidemic events like coronavirus do not persist for long in general. However, the markets' correction has not been steep so far and therefore if markets correct sharply, it could be buying opportunity. Experts also urge investors to wait for further clarity before pressing the buy button or putting any lump sum payment.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.