The markets that fell and what's to be done now

Seven days. That's all it took to break down the Long Term Investor. Putting it in other words, it just required a fall of 10 per cent to completely wipe out the tribe of the Long Term Investor. Over night we have been overcome with self-doubt. Is the market too expensive? Are the valuations stretched? Should we book profits and stay in cash? Will this correction be more severe? How do we play this situation?
That in itself is the mistake…

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Someone who has spent time in the stock market would know that it is quite normal for the stock market to go up and down in certain time periods.
For those who are not familiar with equity markets, it is important to put volatility in perspective. The fact of the matter is that irrespective of the instrument that you invest in, you still have to contend with volatility. Even if you are a conservative investor and have been investing in traditional instruments, you still have to tackle interest rate fluctuations.
As mentioned earlier, all of us need to develop ways to deal with volatility. Let us analyze various strategies for both existing, as well as new investors to handle volatility.

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CLSA has said that the Indian markets were geared for a much steeper fall than what was seen on Thursday.
The international brokerage has also said that it is raising its rating on IT sector to overweight in its model portfolio.
CLSA is saying that Indian markets could have fallen in a much steeper manner than what they fell on Thursday and this is due to the derivative market, which is moving the cash market now. They are saying that the retail open interest, which was at $7 billion in January has risen to $12 billion now and this will lead to volatility.

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