Capitalising on a falling market

The stock markets have been undergoing correction over the last few weeks and a gloom appears to have engulfed investors and traders. This is in sharp contrast to the buoyant mood one witnessed when the markets were scaling new peaks to record all-time highs. One might say that this is a natural reaction of the investors as those who are already invested in the market either suffer losses or see their gains getting trimmed in a falling market. One can lay the blame for the market fall at the doors of many things, be it Donald Trump’s protectionist stance on trade, US Fed’s interest rate hike, reimposition of LTCG tax by the FM on equities and equity mutual funds, among others.

In all these, one tends to forget that this correction was long overdue in the market, which had a spectacular run-up last year. “What goes up, will come down ultimately”, so goes the adage, and stock markets are no exception. The markets have only followed this age-old adage and corrected. So, there should be no reason for complaint.

In fact, one must rejoice that stocks that were available at sky-high prices are now available at reasonable prices and take the opportunity to pick up blue chips stocks that are bound to go up after the market is done with the correction.  Of course, there is a possibility that the prices might come down further from the current levels, but one cannot be too sure. In any case, it is not possible to time the market even for the best of investors, so instead of waiting for the market to reach the elusive bottom, one can start accumulating whenever the market dips, so that the average cost of acquisition goes down further with every dip in the market. For the adventurous, the correction in the market presents an opportunity to go short and make money every time there is drop in the market.