{"id":24983,"date":"2022-09-13T12:11:22","date_gmt":"2022-09-13T06:41:22","guid":{"rendered":"https:\/\/www.fundsindia.com\/blog\/?p=24983"},"modified":"2024-05-09T14:10:49","modified_gmt":"2024-05-09T08:40:49","slug":"indian-equity-markets-near-all-time-highs-what-should-you-do","status":"publish","type":"post","link":"https:\/\/www.fundsindia.com\/blog\/mf-research\/indian-equity-markets-near-all-time-highs-what-should-you-do\/24983","title":{"rendered":"Indian equity markets near all-time highs. What should you do?"},"content":{"rendered":"\n
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In the last few weeks, the Indian equity markets have recovered (up around 17%) and are now close to their previous all-time high levels. <\/p>\n\n\n\n

Whenever markets hit all-time highs, it is natural to feel psychological discomfort<\/strong>. You usually get a gut feeling that the market will fall further. To add to your gut feeling, the last three times the Nifty 50 hit all-time high levels close to 18,000 levels, the markets fell 10-15%. <\/p>\n\n\n\n

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Now that markets are close to their previous all-time highs, it is natural to worry that the same pattern might repeat and markets will fall again.

So, should you reduce your equity exposure now and reenter back at lower levels?<\/span><\/strong><\/p>\n\n\n\n

Before you panic and react, let us take a look at what happened in the past when many investors got anchored to all-time high levels and assumed that all-time highs always lead to a market decline.<\/p>\n\n\n\n

In the past,<\/strong> there were several instances, where equity markets for a temporary period got stuck in a range and saw a repeated pattern of a fall every time it hit all-time high levels. Over time, however, the market eventually breaks out, surpasses this level, continues to grow, and reaches a new all-time high.<\/strong><\/p>\n\n\n\n

Let us see how this works.<\/p>\n\n\n\n

Between 2008 and 2011, Nifty 50 was stuck at 6,000 levels for some time\u2026<\/strong><\/p>\n\n\n\n

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As seen above, the Nifty 50 between 2008 and 2010 hit all-time high levels around 6000 two times in Jan-08 and Nov-10. In both instances, Nifty 50 fell 60% and 28% after that. <\/p>\n\n\n\n

Again in 2014, the market hit all-time high levels, and a lot of investors were already scarred by what happened in the previous two instances and assumed this would lead to another large fall. <\/p>\n\n\n\n

\u2026and then came the surprise!<\/strong><\/p>\n\n\n\n

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This time, the Nifty 50 eventually broke the previous 6000 levels, rallied 73%, and went on to hit new all-time highs.<\/p>\n\n\n\n

Between 2018 and 2020, Nifty 50 was stuck at 12,000 levels for some time\u2026<\/strong><\/p>\n\n\n\n

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As seen above, the Nifty 50 between 2018 and 2020 hit all-time high levels (around 12,000 levels) three times in Aug-18, Jun-19, and Nov-19. In these instances, Nifty 50 fell 15%, 12%, and 38% after that. <\/p>\n\n\n\n

Again in Nov-2020, the market hit the same all-time high levels of 12,000, and a lot of investors were already scarred by what happened in the previous three instances and assumed this would lead to another large fall. <\/p>\n\n\n\n

\u2026and then came the surprise!<\/strong><\/p>\n\n\n\n

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This time, Nifty 50 eventually broke the previous 12,000 levels, rallied 50%, and went on to hit new all-time highs around 18,000 levels<\/p>\n\n\n\n

Now, before all this goes over our heads, let us put this together.<\/strong><\/p>\n\n\n\n