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How To Manage Negative Returns On Equity?

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Taking the one-year returns into consideration, almost all categories of equity stocks barring some sectoral ones are in red. Our calculations of movement in indices as on 30 January 2018 and today, exactly a year later, have shown that large-cap, mid-cap as well as small-cap indices on the NSE (National Stock Exchange) fell in value.

Indices 30/1/2018 (Close) 30/1/2019 (Open) Difference % Change
Sensex 36033.73 35819.67 -214.06 -0.59%
Nifty 50 11049.65 10702.25 -347.4 -3.14%
Nifty Midcap 50 5410.6 4655.45 -755.15 -13.96%
Nifty SmallCap 100 8923.4 6084.35 -2839.05 -31.82%

Sector-wise, the IT (information technology) companies gave its investors good returns considering the weakening of the Indian rupee in 2018 that favoured their dollar revenues. Infrastructure and banking sectors, on the other hand, experienced the biggest decline.

Understanding the change
  
 

Understanding the change

The primary thing about investing in the markets is the need to understand what impacted the investor sentiment in the given period. In January 2018, Indian stock markets were at their peak, declining after the presentation of the Union Budget on 1 February 2018 where LTCG tax was reintroduced on equities hurting domestic investor sentiments. The markets faced further pressure from global factors like the US-China trade conflict that dragged the currencies of emerging economies including the Indian rupee down. It was followed by intense volatility in crude oil prices which led to sell-off from foreign investors, an important segment of investors that move the market's indices.

Long term perspective
  

Long term perspective

If you were to look at the numbers keeping three year returns or five-year returns in perspective, these indicators will appear in green letting us understand that the sell-off in the last year may have only been to clear overbought investments. It also goes to show that looking at equity returns from a one-year perspective is not the right approach, one has to keep long term returns in mind and invest in stocks to achieve long-term goals.

What can you do?
  
 

What can you do?

There's no way to predict the future movements in market but only to observe it closely. Diversify your portfolio by scattering your investments in various sectors in order to gauge risks. The idea is to understand what the particular sector is dependent on and what makes it move (upward or downward) and not get disheartened by the overall movement in benchmark indices that is usually impacted by changes in two or three high profile stocks.

Read more about: equity sensex nifty 50
Story first published: Wednesday, January 30, 2019, 12:52 [IST]
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