Carnage on Dalal Street - Day 2

If yesterday was a shock, today was spectacular. Within 5 mins of the market opening the BSE sensex had hit the lower circuit of 10% and trading was halted! A drop of about 2000 points in 5 mins. An event which prompted the PM and FM, to intervene and issue statements that the fundamentals had not changed and that India would continue to grow at 8-9% clip. When trading resumed after an hour the markets still traded volatile, recovering then sinking and finally recovering to an 800 point loss to close the day. Weak cues from the global markets and the margin trading issues contributed to the carnage.

This is a good time to enter the markets. One of the main principles of value investing is buying low and this situation provides the right environment to choose the stocks and invest in them for the long term. Ofcourse, a lot of research and analysis needs to be done before investing, but if you believe in the Indian growth story and dont have that much time, the best idea would be to invest in Index funds. The advantage being their low expense structure since no one has to manage them and inbuilt diversification.