Is this the right time to buy stocks, or one should wait for more correction in prices? Well, this question crops up everytime the market sees some sharp downside. The reasons for such setbacks may be different at different times, but the fact remains that investors, especially the small timers or the retailers, often find themselves in a tight spot.
In these days of globalisation, a market cannot continuously ignore the trends in other markets. The rise or fall in one market may not be in proportion with the rise or fall across other markets.
Crude oil's rise may result in an uptrend for markets like the U.S., Canada or certain markets in Europe. But for the Indian market, crude oil's rise is a dampener as the country depends on imports for more than two thirds of its crude requirements. Crude's rise may significantly eat into the country's dollar reserves, and, if the rupee is on a downward spiral at that time, like how it is currently, then the problem gets bigger, as the economy will find it tough to rein in fiscal and current account deficits.
The other major concern now is the U.S.-China trade dispute. Last week there were reports that U.S. and China will likely have a fresh round of trade talks to help diffuse trade tensions. This resulted in global markets scoring strong gaind during the latter part of the week.
However, according to some reports today, the Chinese government is considering to reject the U.S.' offer of talks as it isn't prepared to negotiate with a "gun pointed to its head. Meanwhile, reports suggest that the U.S. government may announce new tariffs about $200 billion of Chinese goods today.
As for U.S.-India trade ties, India is reportedly considering to defer retaliatory duty against the U.S. on import of around 29 products, including apples, walnuts, pulses, certain iron and steel products by 45 days. The duty was scheduled to come in to effect from September 18.
The decision to impose duties on these products was taken in early August after Trump administration decided to levy tariff on certain steel and aluminum products.
There will be some general analysis that predict a recovery or otherwise for the market once there are some steep slides. While it makes sense to read what experts have to say about market trends, it is not advisable to blindly follow the advices and buy, sell or hold stocks that are recommended. One needs to look at affordability in terms of available cash, investment duration and losses that he or she can bear, while making a move to buy a stock in the falling market.
Yes, it holds good, when the market is rising too, but then, in a falling market, one tends to lose patience and heart as well, and one might panic and exit the counter at an inappropriate time. More often, we have seen people booking losses in stocks, and feeling bad about their decisions, as these very stocks start climbing up north pretty soon thereafter.
If one is looking at medium or long time, no big harm is likely if you are looking to pick up a stock with pretty strong fundamentals and that with no big hurdle to face even if there is a sell-off in global markets due to economic or geopolitical reasons. Such stocks may still see some downside, but then they will be among the earliest to bounce back and move up north once things falling in place and markets get back on recovery mode.
These are early lessons in stock investment. But one keeps learning right through irrespective of how big or small he is as an investor. Because, situations may frighten anyone and make decision-making a tough job.