This market crash couldn’t have hit India’s middle class at a worse time. Economic growth is slowing, wages remain stagnant, private investment has been sluggish for years and job creation isn’t keeping pace. Amid these challenges, many new investors, lured by rising markets, are now grappling with unexpected losses.
“In normal times, savers can take short-term setbacks, because they have steady incomes, which keep adding to their savings,” noted , externalAunindyo Chakravarty, a financial analyst.
“Now, we are in the midst of a massive economic crisis for the middle-class. On the one side, white-collar job opportunities are reducing, and raises are low. On the other, the real inflation faced by middle-class households – as opposed to the average retail inflation that the government compiles – is at its highest in recent memory. A stock market correction at such a time is disastrous for middle-class household finances.”
Financial advisers like Jaideep Marathe believe that some people will start taking money out of the market and move them to safer bank deposits if the volatility continues for another six to eight months. “We are spending a lot of time telling clients not to liquidate their portfolios and to treat this as a cyclical event.”
But clearly, all hope is not lost – most believe that the market is correcting itself from previous highs.
Foreign investor selling has eased since February, suggesting the market downturn may be nearing its end, says veteran market expert Ajay Bagga. Following the correction, valuations for many stock market indices have dipped below their 10-year average, providing some respite.
Mr Bagga expects GDP and corporate earnings to improve, aided by a $12bn income-tax giveaway in the federal budget and falling interest rates. However, geopolitical risks – Middle East and Ukraine conflicts, and Trump’s tariff plans – will keep investors cautious.
In the end, the market meltdown might serve as a hard lesson for new investors.
“This correction is a much-needed wake-up call for those who entered the market just three years ago, enjoying 25% returns – that’s not normal,” says Ms Halan. “If you don’t understand markets, stick to bank deposits and gold. At least you have control.”
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