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Missed the 6% single day equity flight up? Now what?

Till last week we were talking about why one should keep investing through an equity market down turn and how market uncertainty should not be acted upon. In what was a rare event, benchmark equity large cap indices, Nifty 50 and Sensex rallied nearly 6% in a day.

Its human nature to feel left out if you aren’t participating in something that is perceived to be beneficial. 

Till last week we were talking about why one should keep investing through an equity market down turn and how market uncertainty should not be acted upon. In what was a rare event, benchmark equity large cap indices, Nifty 50 and Sensex rallied nearly 6% in a day. Plus, the corporate tax rate cut announcement that led to the spike is a good enough reason to bring in sustained optimism in equity markets.

If you are thinking you missed out on these sudden gains because you weren’t invested or if you redeemed too soon and now feel left out because you didn’t jump back in before the rally, then think again. Keep in mind the long-term equity return, rather than sudden single day spikes.

Even if you were sitting on the fence waiting for a ‘bottom’, don’t fret about missing out on returns. Remember, equity is a long-term wealth creating asset. Historical data shows that there have been at least 30 other times in the last 22 years when the Nifty 50 moved up more than 5% in a single day. 

It’s never a bad time to start

Even if you were sitting on the fence waiting for a ‘bottom’, don’t fret about missing out on returns. Remember, equity is a long-term wealth creating asset. Historical data shows that there have been at least 30 other times in the last 22 years when the Nifty 50 moved up more than 5% in a single day. 

However, we saw none of these happen in the last 10 years. The last time the Nifty 50 moved up more than 5% in a single day was on the 18th of May 2009, when on a single day the index was up 17%. Let’s say you missed that single day rally and invested right after and remained invested for 10 years till the 20th of May 2019, you would have gained an annualised return of 10.5% in this period. Reiterating the importance of time in the market over timing the market.  

If you redeemed funds in the downtrend…

…. you have missed out on this one-day gain but, it’s this unpredictability in equity markets which deems regular investing a good habit. You can’t know beforehand when the market will fall, or when it will go up and by how much. Hence, it’s imperative to not only remain invested through uncertain periods but also have the discipline to keep investing regularly so that you can be a part of all the ups and downs in stock prices. 

Investors who continued their systematic investment plans through the market correction will benefit from the sudden and sharp move up in stock prices now. Those who redeemed and held cash will miss out on some gains. Moreover, after this 7%-8% rise (over two days) in benchmark indices, the decision on where to now redeploy funds is also likely to be confusing; individual stock prices moved up 10%-15% in two trading sessions.

Instead of focusing on market levels and short-term volatility in price, focus on quality. Good quality stocks and mutual funds benefit the most in the long run. Your job as an investor is to simply remain invested till your equity linked financial goal is fulfilled. 

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