Deep Market Drawdowns: A Test of Patience and Strategy
The markets have been bleeding heavily, and Stable Investor has collated some stark data as of 25th February—though by the time you see this, things may have worsened further.
Analyzing different market cap buckets:
Stocks with a market cap below ₹1,000 crores (3,500 stocks): Nearly half the stocks are down more than 40%.
Market cap ₹1,000–10,000 crores (900 stocks): A similar story, with 50% of stocks falling more than 40%.
Market cap ₹10,000–50,000 crores (300 stocks): Even in this range, nearly 60% of stocks are down by over 30%.
Large caps ₹50,000+ crores (160 stocks): Around 45–50% of stocks have lost more than 30%.
For small caps, the situation is even more extreme—many stocks have plunged 60–70%. The pain is widespread, and very few investors have been spared from this wave of drawdowns.
What Should Momentum Investors Do Now?
From a momentum perspective, the best approach is:
Cutting losses as deeper corrections unfold.
Rotating into relatively stronger stocks that are holding ground better than the rest.
Moving into cash where needed and waiting for the market to stabilize before reinvesting in new leaders.
Markets go through deep corrections, shake out weak hands, and then recover with powerful bull runs. Historically, every sharp correction has eventually led to a massive wealth-creating bull phase—the key is to survive and position yourself well for the next wave.
This is a test of patience, learning, and discipline. If you can successfully navigate two or three major bull runs in a 40-year career, you’ll likely accumulate wealth beyond your expectations.
Now is the time to introspect:
Where were the mistakes?
How can you preserve capital better?
Which sectors will lead the next cycle?
This is not a short-term game but a long-term journey—and those who play it smart will win in the long run.
WeekendInvesting launches – Portfolio Momentum Report
Momentum Score: See what percentage of your portfolio is in high vs. low momentum stocks, giving you a snapshot of its performance and health.
Weightage Skew: Discover if certain stocks are dominating your portfolio, affecting its performance and risk balance.
Why it matters
Weak momentum stocks can limit your gains, while high momentum stocks improve capital allocation, enhancing your chances of superior performance.
Disclaimers and disclosures : https://tinyurl.com/2763eyaz
