Market corrections are buying opportunities

Market corrections are buying opportunities in quality stocks. In the preface to 'The Intelligent Investor' by Benjamin Graham, Warren Buffett says, "To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information.
What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework". If you can strengthen your resolve and stay the course regardless of popular opinion, analyst views and technical targets handed out daily, you will be able to get good returns on your investments.
Markets have seen many ups and downs over the years. These are caused by various macroeconomic factors like inflation, interest rates, recessions and business cycles. India's domestic demand for equities is small compared to the money muscle of the foreign institutional investors (FII). So they are in a position to take the markets to very high levels when buying into Indian stocks or bring down the markets if they sell some of their holdings. So FIIs can be added to the list of factors causing the macroeconomic dance in the Indian stock markets.
In such a volatile, shaky and fragile environment, you have to keep your emotions in check and focus on your investment decision-making. This helps in getting a more objective view of current price fluctuations. If led by emotions you had sold off your entire equity portfolio in May-June 2006 when the Sensex was at 8,799, you would have missed out on the ensuing rally unto 14,035 - a rise of about 60 percent.
The three major emotions that colour investment decisions are fear, greed and hope. Fear makes investors sell very low. When the prices of stocks are nose-diving investors are frightened and sell without checking their investment plans. In such times, it is better to check whether the original reasons for investing in the stock have changed due to the fall in the markets.
The markets can based on a short-term focus and oversell a stock where its price falls well below its fair value. Selling when the price is lower than fair value is meaningless as in the long run the price of the stock recovers.
Hope is the emotion that makes investors purchase a stock based on its price appreciation in the past. Buying on the hope that history will repeat itself regardless of a stock's fundamentals is not a smart move. It is important to look less at the past returns and more into the company's fundamentals to evaluate the investment decisions. Basing your investment decisions purely on hope may leave you with a stock that is already fully valued, with higher chances of losses than gains.
Under the influence of greed investors may hold onto to a stock for too long, hoping for a few extra rupees. When the markets are going up, the euphoria is magnetic and they expect it to continue for long. By doing this investors could end up turning large gains into losses.
Timing your buying price and selling price of any stock is extremely tricky. In early May 2006, investors whose investment goals were already achieved may have lost out if they had held on expecting further increase in the price of their stocks.So, one of the key factors to successful investing is control over emotions.