Caution: Small retail investors must stay away from stock market for some time

Sensex is trading in the region of 43,000 points. A big correction was expected since the start of this year. That correction came in march-April 2020 and within few month, share market again reached its peak. Sensex is climbing higher and higher even after slowdown in GDP and many other negative news such as lockdown due to Covid-19 cases. It seems some players do not wants Sensex to go down and they are pumping money even on small positive news and ignoring negative news unemployment rate, falling sales and Indo-China border conflict.

There is a large disconnect between Indian economy and share market at this moment. Even a slightest negative news can make the market crash. Most of large cap stocks are already overvalued and market PE ratio is at its high, which is the very important indicator of valuation. In such scenario, small retail investors and new investors must not buy new stocks to avoid huge losses. Because stock market can crash anytime and wipe away all your hard earned money in a day or a week.

Wait for correction in stock market for few months before investing. Invest your money in less risky alternatives or keep it in your saving bank account for few months and just wait. If you are very keen to invest, invest through mutual funds which are less risky. To read my post about mutual funds, click here.