Markets crack on election results 2024 day, what should new investors do amid this volatility?

After an over 2500 point rally in the previous session as exit polls predicted a clear Modi-led NDA win in the Lok Sabha elections; Indian markets witnessed a massive correction, down over 3 percent on Tuesday, June 4, the election results day.

The BSE Sensex shed almost 2,300 points in morning deals while the Nifty cracked below the 22,500 mark, down almost 850 points. Today's decline also turned the markets negative for the month of June.

While for long-term investors, this correction can prove to be a great opportunity to accumulate quality stocks, however, for new investors such a sudden turn of events can be extremely confusing.

Read here: Investors lose ₹20 lakh crore within 20 mins of trade as election race gets tighter than what exit polls predicted

Experienced investors may view market downturns as a chance to buy valuable stocks at lower prices, capitalizing on future growth potential. However, new investors might find the sudden market fluctuations overwhelming and challenging to navigate. For long-term investors, market corrections are often seen as part of the investment cycle, providing an opportunity to strengthen their portfolios with strong, fundamentally sound companies.

In contrast, new investors may lack the experience to effectively manage market corrections. The abrupt changes in market conditions can lead to panic and impulsive decisions, potentially resulting in significant losses. Without a solid understanding of market dynamics and proper risk management strategies, new investors might struggle to identify which stocks are worth accumulating during a correction.

Read here: Election Results 2024 Share Market Live Updates: Markets wipe out Monday’s gains

Amid this volatility, 4 experts advise what new investors should do. Let's see what they suggest:

Diwakar Rana, Senior Research Analyst at Prudent Equity

We believe investors should be selective while making a bet on any company. In this market, the companies with the highest likelihood of earnings growth should be the primary focus, and the thesis should not be focused solely on one long-term industry story.

Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS

Maintaining a high-quality quotient is a must in this market as volatility continues to rise. Another critical factor is liquidity. Thus, both these factors will help manage market volatility over the next couple of months.

Read here: Election stocks to buy: Sumeet Bagadia recommends five breakout stocks today

Viraj Gandhi, CEO, Samco Mutual Fund

New investors (particularly those who have entered markets post-COVID) may not have encountered market corrections before. Market movements follow cycles, and a misstep during a correction could result in significant losses for new investors. Therefore, it's crucial to conduct thorough due diligence and practice effective risk management before making any investment decisions. Rushed or speculative investment choices could have severe consequences.

Vaibhav Jain of Share.Market Research

If you are new to the markets, it’s best to avoid trading on high-volatility days like election result day. New investors should start their investment journey with a focus on long-term wealth creation which would compound over time. The market may react strongly to short-term impacting events like Elections or Budgets. As we have seen, in the long run, the fundamental strength of the economy should matter more and this is where the new investors should put greater focus.

Read here: India witnessing a mini-Goldilocks moment, says Motilal, lists 21 top picks

In summary, market experts advise investors to be selective and prioritize companies with strong earnings growth potential, maintain high quality and liquidity, conduct thorough due diligence, and focus on long-term wealth creation. This approach helps manage market volatility and reduces the risk of significant losses, particularly for new investors who may be less familiar with market corrections.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.