What SENSEX & NIFTY Don't Tell You

The SENSEX peaked at 85,978 on 27 September 2024 and corrected to 76,802 on 21 November 2024, marking a ~10% decline. As of 26 November 2024, the index recovered to 80,004, representing a 6.8% correction from its September highs. But is this the whole story of the Indian stock market?

Beyond the Indices: A Deeper Market Reality

SENSEX and NIFTY track only 30 and 50 stocks, respectively—a mere 1% of the 4,700 actively traded companies. They fail to reflect the broader market's performance and trends.

When we look beyond these indices, we see a stark trend where more than 43% of stocks have corrected by 10% to 30% from their 52-week highs, with approximately 33% experiencing a correction between 30% and 50%

Correction from 52-Week High	Number of Stocks	Percentage of Total Stocks
Less than 10%	731	15%
10% - 30%	2,059	43%
30% - 50%	1,570	33%
More than 50%	441	9%

What This Means for Investors:

The data above shows that valuation for many companies beyond the indices have significantly corrected and are now trading at reasonable valuations. This makes it critical for investors to closely assess the quality of their equity mutual fund holdings.

Here’s how you can position yourself:

1.     Capitalize on Valuation Corrections & Reassess Your Portfolio

• Many quality companies are now trading at reasonable valuations, offering a prime entry point. Look for mutual funds holding such companies along with a proven ability to navigate volatile markets.

• Evaluate your mutual fund holdings to identify opportunities and reduce exposure to underperformers. 

2.     Stay Disciplined with SIPs

• If you're already investing through systematic investment plans (SIPs), stay the course.

• Ensure that your SIPs are in funds with robust fundamentals and strong management teams.

3.     Act Now with a Long-Term Perspective

• For investors on the sidelines, this is an ideal moment to invest in Mutual Funds. Current corrections provide opportunities to build a portfolio poised for growth over the next 5+ years.