Once in an interview most admired and successful investor Warren Buffett said that “The best chance to deploy your capital is when things are going down”. We all know that the best investment time is when their market is going down. Because most of the valuable scripts we can get at cheaper price Right? But the question was Which Investment Strategy should we use to invest in the volatile market!? Let’s understand one by one result giving investment strategies that can use in this volatile market. But before that, we must know why markets are falling day by day?
Reason for Volatile Market
On Feb 24 Sensex and Nifty falls down somewhere around 5% after Russian President Vladimir Putin announced the military operation in Eastern Ukraine. On that day the market was also impacted by the expiry contracts of the February derivative. Because of these major impacts on the market both Sensex and Nifty fell over 10% from the all-time high.
But the question arises that why this war was impacted so badly to the Indian market? Let’s understand it by analysing the import and export trades between Russia-India and Ukraine-India. India Exports so many things to Russia which are highly impacted by the war. Such as we export 3028 crores worth of electronic equipment, 2867 crores worth of Pharma Products, 1677 crores worth of Nuclear Reactors, 1371 crores Organic Chemicals, and 1176 crores worth of Iron and Steel. On the other hand, we import 28050 crores worth Mineral Fuels and Oils, 7316 crores worth Pearls, Stones and Coins, 3014 crores worth Fertilizers, 2055 crore worth Project Goods and 1979 crore worth of Animal, Veg Fats and Oils.
At the same time, India also exports 812 crores worth of Pharma Products, 160 crores and 154 crore worth Nuclear Reactors and Plastics to Ukraine respectively. Also, we are exporting Iron, Steel and Misc. Chemical Products to Ukraine. On another hand, India imported 10193 crores worth of Animal, Veg Fats, Oils and 1976 crore worth of Fertilizers from Ukraine. We import Inorganic Chemicals, Project Goods and Wood worth 1325 crore, 261 crores and 207 crores respectively from Ukraine.
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Now we completely understood that what are the causes that suppressed the Indian Market. Here we have a great opportunity to invest in some of the high-quality stocks which is badly impacted by this war. But Which investment strategy we should use to invest in a volatile market? Let’s understand.
The first thing we have to keep in our mind is that do not to put all your capital in a single script. Rather than choose two to three segments which was highly impacted. Now find out the best quality stocks of that segment. Again, don’t put all your capital in one shot. You should invest your money in chunks. Because anyone can not predict the market. By following this strategy, we can average our buying price. So that when the situation gets saturated, we can make a huge amount of profit.
As we analyse early in the article we export Pharma Products to Russia and Ukraine both. So, these category stocks were impacted. We export Iron and Steel to Russia and Ukraine so mining business; Steel processing business and Steel Product companies were badly impacted due to this situation. Here we have to consider that Russia is the largest Crude Oil exporter in the world. For that reason, crude oil prices will also fluctuate most. And it impacts the crude oil refining and Petro chemical-based companies.
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In last words, the market is so volatile and investors are so panicking. Do not panic in this situation and treat this situation as an opportunity. We have to analyse some categories of business which was highly impacted. And analyse their valuation majority of them are trading at a lower valuation. It is a great opportunity to invest in a high-quality business that is trading at a cheaper price. So don’t panic, don’t take out capital from the market. Rather than booking losses invest more and try to take advantage of the situation.