WHEN MARKETS HIT ROCK BOTTOM, SAIL UP WITH YOUR SIP

The world is undergoing COVID-19 impact and the market has been vulnerable to it too. The markets crashed around the world and are looking to enter a recession. The S&P and BSE Sensex benchmark has fallen from a high of 42,000 in January to 25,000. Crude oil price have also staggered. The scenario might look nightmarish, but it is not so.

- Jyotsna Joshi

MARKET REACTION DURING THE CRISIS

Looking back to 2008, when there was a global downturn due to the sub-prime crisis, the Sensex halved to about 8,000-9,000 levels by the end of that year. Investors, who despite advice to the contrary, continued to stay invested through that volatile period would have benefited with the Sensex growing fourfold over the next decade (2008-2018).

Most of the market analysts believe, COVID-19 induced market fall is likely to be a temporary phenomenon, which was the case during earlier epidemic outbreaks also. See the chart and find the impact of each fall. If we look at the SARS outbreak in 2003 the US S&P 500 lost 3.6%, but gained 33% a year after the outbreak. The BSE Sensex lost about 10% during the period, but gained a huge 83% after the outbreak.

During the Zika outbreak between November 2015 and February 2016, it fell around 6%, but was up more than 21% a year after the outbreak. Also, the BSE Sensex, lost around 13% during the Zika outbreak but was up 24% a year later.

One most prevailing question currently ongoing is what should an investor do?

DO NOT STOP YOUR SIPs