INSUBCONTINENT EXCLUSIVE:
The panic over the economic fallout of the coronavirus outbreak caused a deep crack in financial markets globally, and Dalal Street too has
suffered major damage.
BSE benchmark Sensex tanked 6,639 points in 36 sessions to close at 35,634 on Monday, coming down from its all-time
high of 42,273 hit on January 20.
This has in a way sent the investment theses haywire for most investors
Analysts say panicking in such situation can lead to more wealth erosion
Instead, investors should focus on protecting capital by avoiding some common mistakes that they usually make in a downtrend market.
Buying
low P/E stocksPrice-to-earnings ratio is a common valuation tool
But a buying or selling decision made on the basis of this ratio alone is not prudent
Expensive stocks can become cheap, and cheap stocks can become cheaper in a down market
In many cases, stocks with low P/E ratios may be suffering from weak fundamentals, where shrinking market share may have resulted in lower
Broking.
Buying before a base is formedDuring the recent market correction, many stocks fell to their respective 200-DMA levels and only
In most cases, stocks that have come down to their 200-day lines may have done so amid signs of institutional selling
Wait for the stock to prove itself, and look for signs of institutional buying as stock builds the right side of the base
bullish stock charts tempt investors all the time in a down market
Some growth names will hang in there with compelling charts
it said.
Averaging your lossesSuppose a stock trades at Rs 100 a share
Your cost basis is Rs 100
The stock heads lower, and you buy an equal amount of shares at Rs 80, lowering your cost basis to Rs 90
Then you add further at Rs 75 after it breaches its 50-and 200-DMAs
The problem is market participants normally tend to average down their holdings, which are under tremendous institutional selling pressure
attentionIt is easy to lose interest when stocks are selling off, but market downtrends let high-quality names take a breather and
eventually build new bases
visible at the end of the tunnel amid a rise in the number of coronavirus cases throughout the world
China has again reported an uptick in new confirmed cases of infections, reversing four straight days of slowdown, driven by infected
individuals arriving from abroad.
Some market experts are advising investors to keep power dry
