Will the Stock Market Crash 2020 Destroy Faith in Investments?

Stock markets are seeing unprecedented chaos. The crash brings with it not just the destruction of wealth but also the destruction of faith in investments. So much is the panic and chaos that news channels are equating the stock market crash 2020 with bloodbath at Sensex and a Dalal street massacre. The crash was so sudden that many new investors looked perplexed. The bulls were taken aback.

This market crash can change the long term outlook for a lot of new investors. It seemed that no one can judge the next Indian stock market crash prediction.  Most analysts are attributing the new mutation of the ‘super-spreader’ COVID strain found in the UK as the reason for Indian stock market crash today. As the UK Health Secretary remarked that this new strain is 70 times more infectious, the panic it raised was natural. The stage was however already set for the crash. The market valuation of most companies had reached quite high. There was an all-time high inflow of FIIs into India. With the global sentiment weakening, the effect on Indian stocks was quick to follow. The intensity of the fall was something no one could predict.

stock market crash

What happens when the stock market crashes?

As the selling increases, the market sentiment weakens. This leads to more selling and a continued dip in the market. People start fearing more and a string of panic selling is triggered. Months and years of gains are wiped out in days. The quick and brutal fall is no less than a roller coaster. Imagine losing all your savings in a blow! This is why people fear the crash.

Panics are turned into opportunities by few. With panic selling, most stock prices reach an all-time low. All you need to do is to wait for the lowest prices and then start buying. Buying at dips is the best strategy for a falling market. Buy and forget till the market wheel turns. Book heavy profits later.

What investors should do next?

As the Christmas vacations begin, the inflow of FIIs will come to a halt. The market valuations of most stocks will be corrected. The travel bans and reduced economic activity will keep the market sentiments low. The equities market is expected to remain volatile. The best thing to do now is to avoid doing anything at all, be it buying or selling. Panic selling benefits none. Sit on the market and watch. As the market shows the first signs of correction, it is then that you should buy more shares and enjoy the low prices. Add quality stocks to your portfolio when the market starts getting healthy again.

Can we decipher anything from the market trend?

The biggest crashes in the Indian stock market have been attributed to unstable governments, an erratic or sudden change in government policies like demonetization, the ripple effect of the international market as can be seen with COVID panic.

A crash is called a crash because of its sheer velocity. The panic is the market is chaotic. While everyone was expecting the market to go down, the sudden dip is what caused the bloodbath. Almost all Sensex stocks closed in red. It is this suddenness that is not easy to predict. It is not easy to predict the exact moment when the market would start withdrawing all at once.

stock market crash

As can be seen, most of the steep falls witnessed in near future were attributed to one or the other external forces, be it the COVID-induced panic or an international crisis. It is not very easy to predict such events. All one can do is contain the profit appetite. Start being cautious once the market shows a continued upward trend and book profits before it’s too late.

Will the stock market crash 2020 attract new buyers, remains to be seen.

Also Read: Beat Lockdown Blues; Try the ‘Happiest Minds Technologies’ Guide

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