As investors suffered a massive loss of over Rs 200,000 crore in a day that saw the Bombay Stock Exchange's (BSE) Sensex plunge 704 points, or 4.1%, to 16,361.15, experts said that investors should take a long-term view of the capital market and take an opportunity to invest at lower valuations.
The fall in the benchmark index, the biggest in percentage terms in the last one year, was fuelled by the the US Fed’s (central bank) warning on the American economy, triggering fresh fears of a global slowdown.
Realty and metal stocks, which lost 5.7% and 4.3% respectively, were the worst hit on the BSE.
The Nifty of the National Stock Exchange also fell by 209.6 points, or 4.1%, to touch 4,923.7.
World stocks hit a fresh one-year low and investors poured money into safer currencies.
"Whether you are an investor with R5 lakh, Rs 10 lakh or a Rs 30-lakh investment portfolio, the way ahead is to first understand that globally stock markets are going to be volatile," said Gaurav Dua, head of research, Sharekhan. "So an investor who wants to keep his risk down should stay away from realty and banking stocks but prefer FMCG (fast-moving consumer goods) and pharma stocks."
According to analysts, investors who have booked losses should stay put in those stocks. Also such investors could try to buy stocks at lower valuations to nullify the loss.
"If an investor is buying at this point they should be selective about stocks," said Uday Narayan Dubey, vice-president, research and institution business, RK Global, a finance service provider.
The markets are likely to fall further in the next two-three months, according to analysts’ projections. The Sensex could fall to 15,000 points, while the Nifty could breach 4,200.
"We are overweight on cement, pharma and to some extent telecom and IT," said Dubey. "Investors should avoid metals and real estate."
Industry experts said concerns about the US and the European Union’s crisis are also playing on minds of investors.