EQUITY MARKETS: WHAT CAUSES LOSSES?

Decoding the market trends and the factors that play a role in its stability

- Viral Bhatt

The Indian equity markets have always been a hot topic for discussion, especially among retail investors. With the market's inherent volatility, many investors experience losses, and it's easy to blame the market for those setbacks. But is it really the market causing the losses, or could it be our own actions? This article explores the critical question: What is really responsible for these losses -- markets or individual behaviour?

Market volatility

The Indian equity market, like any other, moves in cycles. It is influenced by macroeconomic factors such as inflation, interest rates, corporate earnings, and global geopolitical events. Volatility is a natural part of this landscape, and temporary fluctuations often result in short-term losses. However, long-term investors typically benefit from these ups and downs if they stay invested with the right strategy. But are market movements the only reason for losses? Let's dig deeper.

Behavioural biases

Behavioural finance, a field that combines psychology and economics, suggests that investor behaviour is a significant factor behind losses. Often, it's not the markets but our own decisions that lead to poor outcomes.