Do not exit in panic or buy falling stocks without reassessing fundamentals; instead, build a watchlist and invest gradually with a disciplined, long-term approach.
Key Points
- 'By exiting during temporary declines, you could miss out on the recovery.'
- 'Do not assume that the current correction will behave like the other recent ones.'
- 'Do not keep buying more of falling stocks without reassessing their fundamentals.'
- 'Construct a portfolio with no fewer than 20 stocks at any point in time.'
The Indian markets have witnessed a lot of volatility this month, owing to the US-Israel war against Iran.
The Nifty 50 is down 9 per cent, the Nifty Mid Cap 150 6.9 per cent, and the Nifty Small Cap 250 9.2 per cent year-to-date.
Meanwhile, the number of demat accounts has risen by 32 million or 16.8 per cent over the year ending February 2026.
Many of these are new investors experiencing their first major bout of volatility.
Market volatility investor mistakes
Not all corrections are alike. Investors often make behavioural mistakes during a market downturn, like indulging in panic selling at market lows.
"By exiting during temporary declines, you could miss out on the recovery," says Feroze Azeez, joint chief executive officer, Anand Rathi Wealth.
Often, recency bias affects behaviour. "Do not assume that the current correction will behave like the other recent ones," says Shrikant Chouhan, head equity research, Kotak Securities.
While the 2020 COVID-19 crash and the 2025 tariff-led correction saw sharp recoveries, all corrections may not follow the same pattern.
Investors tend to chase beaten-down stocks blindly.
"Do not keep buying more of falling stocks without reassessing their fundamentals," says Devarsh Vakil, head of research, HDFC Securities.
A highly concentrated portfolio can be risky.
"Construct a portfolio with no fewer than 20 stocks at any point in time," says Kashyap Javeri, fund manager & head of research, Emkay Investment Managers.
Fundamentals vs price decline
Volatility or deterioration in fundamentals? Investors must distinguish between a price decline caused by broad market volatility and one driven by a deterioration in fundamentals.
"The broad market can fall because of global uncertainty, geopolitical events, and commodity price movements even when fundamentals remain stable," says Azeez.
Revisit the original reasons for owning the stock and examine whether they hold. Check whether the company's balance sheet remains strong, debt is manageable, and earnings growth remains steady or improving.
"Assess expected growth over the next three to five years rather than rely only on historical earnings," says Vakil.
Also assess whether its long-term competitive advantage, business outlook, and industry dynamics remain positive. Retain stocks generating strong cash flows.
Assess the valuation at which the stock was bought.
"Even a great company can be a bad investment if you pay too much during a hype cycle," says Vakil.
"If these checks remain positive, treat the fall as part of the broader correction and respond with patience rather than panic," says Vakil.
When to sell stocks
What to sell. Sell if the original investment thesis no longer holds and visibility on future earnings growth is weak.
"Shrinking margins despite revenue growth signals a loss of competitive advantage or rising cost pressures," says Vakil.
Exit cash-burning companies in highly competitive industries.
"Frequent changes in top management, accounting irregularities, and corporate governance issues are other reasons to sell," says Vakil.
Post correction opportunities
Post-correction opportunities. Market corrections throw up opportunities to buy the right stocks at the right price.
"Corrections compress valuations across the board and create opportunities in quality businesses," says Akshay Chinchalkar, managing partner and head of markets strategy, The Wealth Company.
"Opportunities are opening up in auto and auto ancillaries, capital goods, financials, and in small- and mid-cap space at the granular stock level," says Javeri.
How to deploy money
How to deploy fresh money. Identify 10 to 12 businesses you would want to own for three to five years and start building positions at current levels instead of waiting for the exact bottom.
Split the intended allocation into three tranches and deploy them gradually.
If you have a three- to five-year horizon, do not check your portfolio every day because that can trigger poor decisions.
"Keep a watchlist of quality names with target buy prices and act on logic rather than panic," says Chinchalkar.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Aslam Hunani/Rediff
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