Today Indian Stock Market took a dive and almost every single Stock was down, especially the Small and Mid Cap Stocks so today I am going to talk about why we have witnessed this fall and was this fall justified or if it just came out of nowhere. So to explain this drop in the Stock Market in India you have to understand a couple of things and those are as follows
Why The Market is Falling?
There is not just one reason for the Market falling today especially the SmallCap and Midcap Indices and one of those reasons was because of the High Valuations that these Stocks were trading at. So it was kind of time that there was some profit booking to be done and also the fact that we were heading towards the risky zone when it came to Smallcap and Midcap Stocks.
The next factor that played a key role in this might just be the Reserve Bank of India as just a week ago the RBI issued a circular where they suggested and insisted different Mutual Fund houses stop Investing in Small and Mid-Cap Stocks so this might be another reason why Investors decided to just book some profits before the Bull Run was over.
The next point is also related to our beloved RBI where they have stopped HNIs from Investing in Indian Stocks. They did so by stopping Finance companies from providing loans to these HNIs and thus indirectly stopping High Net Individuals from investing more funds into such risky Stocks. Once the HNI's were stopped from getting Finance they started liquidating their Stocks to get liquidity and it meant that they had to sell a bunch of Stocks and guess which Stocks they picked to Sell.
How Should You Protect Yourself From Such Falls
I would like to say that if you are investing in Stocks and mainly Small Cap Stocks then you should always make sure that your Investing horizon is long Small Cap Stocks go through a lot of ups and downs so invest only if you have strong faith in your Stock Pick and not just invest in one stock just because you got a Tip from a friend of a friend.
There is no such full proof method where you are guaranteed to make money even when the Stock Market goes down so just hang on and wait till the next Bullish trend comes and picks up your Negative Stocks back, provided you have decent stocks.
So if you ask me what I will be doing I will say that I will be just quietly holding all my Stocks as I have conviction as to why those Stocks will bounce back sooner or later.
Posted Using InLeo Alpha