How do falling markets affect your investments?

Equity benchmarks Sensex and Nifty traded 8% lower on March 16, 2020. The BSE Sensex plunged 2713 points lower at 31,390 and NSE Nifty fell by 757.80 points at 9197.40 points. The falling markets have left investors jittery, with overseas investors or FPIs already pulling out a mammoth Rs.37,976 crores from the Indian market. All sectors were trading in red, with a fall of 8-9% in private banking, financial, realty and metal indices.

Intensifying the problem globally is the ill-timed crude oil war, even though such may work for the good of oil importing nations like India. So, as equity markets send bearish signals and the commodities and currency market experiences onslaught, you may want to review your portfolio and take into consideration what a downward trend would mean for your finances.

During these times, fixed-income instruments like government savings schemes and fixed deposit have become preferred investment instruments, which can stabilize portfolios with assured returns.

Here are some more thoughts on how your investments can be impacted, as markets fall.

Bear markets and your investments

With the benchmark indices falling more than 20%, India’s markets turned bearish. And, when it comes to personal finance, when the market takes a bearish turn, stock prices decline, and your portfolio’s net worth deteriorates. Bear markets are known to be bad for those in need of immediate liquidity, but turn out to be fine for the long-term investor.

Experts may advise differently: some may push for equity allocation and others may advise you to stay put or to draw out if you need immediate funds. Ultimately, what matters is how much cash you need at hand and what your future goals are. But if this is not the best time to make a drastic decision, it is a good time to review your risk profile.

Understanding your risk profile when markets fall

With volatility tightening its grip on the market and investors tasting loss, now is a good time for an honest self-evaluation. It means evaluating how far your current investment strategy will take you. If you find that your exposure to market-linked instruments is too much, allocate your wealth to safer havens. Fixed deposit, for instance, is known to give steady returns and despite recent reduction in FD rates, you can get competitive FD interest rates by investing in company fixed deposit.

Bajaj Finance Fixed Deposit is an option to consider: It offers returns at interest rates of up to 8.05% and an environment deemed as stable by ICRA and CRISIL. The FD boasts of the FAAA ratings by CRISIL and MAAA ratings by ICRA, which are the highest in their respective categories.

Consider this table to know how an investment of Rs.25 lakh grows over a 5-year tenor for different investors.

Customer type Interest rate Maturity value Growth of savings (%)
New 7.80% 36,39,434 45.57%
Existing 7.90% 36,56,346 46.25%
Senior citizen 8.05% 36,81,831 47.27%

These figures were generated with the FD calculator.

With over 45% growth over a 5-year window, Rs.25 lakh grows to Rs.36.39 lakh for regular customers, Rs.36.56 lakh for existing customers, and Rs.36.81 lakh for senior citizens.

Achieving liquidity during times of turmoil

What makes an FD a good option is that assured returns translate to sufficient liquidity for your goals. In fact, experts advise that if you need the money you are about to invest in the next five years, stay clear of stock markets. Young investors can enjoy the convenience of SIPs with assured returns by starting a Systematic Deposit Plan with Bajaj Finance.

Here, you make contributions of Rs.5,000 or more per month, with each contribution opening a new FD. The FD earns interest at the rate prevalent on the date of deposit and matures after the period selected when starting the Systematic Deposit Plan. You can have between 6 and 48 deposits and after the first one matures you enjoy liquidity every month.

So, as stock markets reflect uncertainty, you can place growth on the horizon by employing prudence and identifying worthy assets. To start with an FD, simply book a Bajaj Finance online FD from the comfort of your home today!

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