Just a week into the new year, and the market is suddenly gripped by fear. The fear pertains to geopolitical developments and global investment flows. What are investors fearing now? Fears of the trade deal fizzling out, concerns of strong FII outflows, and anxiety over a near-term sell-off in Indian equities are all around us. But what changed in a week?
The year began with a lack of fear in Indian equities. The VIX was trading closer to its lows even when the index was shy of its all-time highs. Clearly, investors were just not expecting any market weakness as the year began. The sudden weakness seen in the first week of trading caught markets off guard.
While news flows and policy expectations are the reasons for the sudden volatility, the real concern is a lack of preparedness for a correction. Investors are unable to deal with a correction that lasts for just one week. The lack of preparation for a correction is clearly visible in the sudden spike in fear. If investors prepare for corrections, they will focus on the investment actions during corrections. Fear will not stop them from investing.
Investors need better preparation for corrections in 2026. Preparation will strengthen portfolios as investors participate by adding to their portfolios and keeping enough cash to buy the dip. An investor’s top priority right now is making market volatility a friend.
The year should see more volatility, and there will be ample investment opportunities for the fully prepared investor. While you can’t predict the market, being prepared will definitely help investors handle volatility better during corrections.
