Stick to your portfolio if you have invested in blue chips

The stock markets across the globe, including European, the United States and Asian stock markets, plummeted as fears over rising inflation and slowing economies. Foreign investors are on a selling spree. FPIs have been dumping equities and shifting the investment corpus to bonds. Recently, many central banks, including The Federal Reserve, Bank of England, Reserve Bank of India, and the Swiss central bank, have hiked the benchmark interest rates. Raising interest rates is the central bank's strategy and the primary option to arrest inflation.

All kinds of investments including bitcoin, have tumbled recently due to the high inflation and other economic conditions. Global markets came under huge selling pressure after the interest rate hike by central banks.

In general, rising interest rates affect the stock market performance as the interest rates, and equity markets tend to move in opposite directions. Because of the rising interest rates, the stock market will face stiff competition from the bond market. Hence, market sentiments have been weak across the economies.

The weakening of the rupee, high inflation, lower economic growth, consequences of the Ukraine war, halting wheat exports, persistent fears of a fourth wave of Covid 19, a brutal selloff by foreign investors, rising bond yields, fear of recession, and other reasons sent stock markets plunging. The market will continue to be volatile, and most indices may slip into the red in the coming days. However, the medium and long-term investors need not worry. India's improved macroeconomic environment is looking favourable from the long-term perspective. Investors are more likely to panic and sell stocks amid market crashes and turbulent economic conditions.

What you see in your equity portfolio is a notional loss. It will become an actual loss when you react to the market bloodbath and panic sell. If you panic-sell amid the market crash, you not only book the losses, but also you may miss the upside. However, you may think of selling the loss-making sector/stocks and keeping the stocks and sectors in the green.

You may also consider reshuffling the portfolio. The Indian stock market plummeted to a 52 week low. This is an opportunity to pick the gems with attractive valuations and enormous future potential if you have surplus funds. Keep your asset allocation intact and stick to your portfolio if you have invested in blue chips and fundamentally strong companies.

During the Covid-related market rout in February-March 2020, many investors entered the market by buying stocks that were available at low rates and made significant gains. Stay invested if you have a long-term horizon. The downturn in stock markets is bound to occur. Patience and perseverance will gradually fetch you lucrative returns. During the onset of the global coronavirus pandemic in early 2020, markets fell by over 30 per cent in 20 trading days due to the bloodbath in equity markets across the globe.

But, within six months, the market rebounded and went on a bull run. Before arriving at any conclusion, reviewing and rebalancing your portfolio is essential if the allocation in equity or any other asset class has substantially become underweight or overweight. During a crisis-like situation, one must take guidance and advice from a qualified and authorised investment advisor or a financial planner. It's normal to feel depressed and frightened amid a market bloodbath when your investment is for the short-term, or you are a relatively new entrant in the equity market. But, be calm and optimistic if your time horizon of investing is long-term.