Needless to say 2011 was a bad year for the Indian equity market. The benchmark indices, the Sensex and the Nifty declined about 25%, whereas broader indices such as the CNX 500 declined close to 27%. While global factors such as the European crisis and slow recovery in the US were the main triggers, inflation in India as well as delay in government policy-making were the main reasons behind India’s disappointing year on the stock market.
In fact, investors have lost money if they were invested in equities for the last four years.
The premise of long-term returns that equity investments assume gets shaken if returns in a single year decline more than 20%. Risk aversion is natural fallout where investors are more likely to stay away from the asset class. However, amid the equity chaos last year, there were some critical lessons that investor can keep in mind. Market movements can’t be predicted and over the years it’s your experience in investing which makes the difference and helps you outperform the market returns.