Market crashes are inevitable—what separates successful investors from the rest is how they respond when the floor falls out. In June 2025, Foreign Institutional Investors (FIIs) sold a net ₹4,892 crore of Indian equities, reversing the previous month’s ₹19,860 crore inflow . Simultaneously, on June 13, 2025, the Nifty 50 slid below 24,750, and the Sensex lost over 570 points in a single session as geopolitical tensions and global cues rattled Dalal Street . These jolts can leave portfolios deeply bruised—but with the right preparation, you can not only survive but thrive in the aftermath.
This guide demystifies the crash cycle and lays out actionable, simple steps to protect your wealth. By the end, you’ll know exactly what to do before, during, and after the next crash.
1. Learn from History: Crashes Aren’t New
India has weathered multiple severe downturns:
- March 2020 COVID‑pandemic crash: Sensex fell over 13% in one day on March 23, marking its worst single‑day loss in history.
- June 2024 post‑election crash: Nifty plunged nearly 6% in a single session after unexpected general‑election results, only to recover 11% the next month.
- Crash of 2025: Triggered by oil shocks, FII outflows, and policy uncertainty, benchmarks fell over 15% from their September 2024 peaks through February 2025.
Key Lesson: Every crash is followed by a recovery. Historically, markets bounce back over 12–24 months if you stay invested and have a plan.
2. Cultivate the Right Mindset
Your mindset is the bedrock of crash survival:
- Stay Calm: Panic leads to impulse selling at the worst possible time.
- Think Long‑Term: Stocks represent ownership in businesses—unless a company goes bankrupt, its value often rebounds.
- View Crashes as Opportunities: Steep drops let you buy quality assets at discounts.
Action Step: Commit to a written principle—e.g., “I will never sell equities in a crash unless my emergency fund is depleted.” Revisit it when markets test your nerves.
3. Build an Emergency Cushion
When markets crash, you don’t want to sell at a loss to cover living costs:
- Target: 6 months of living expenses in liquid assets.
- Vehicles: High‑interest savings accounts (4–5% p.a.), liquid debt mutual funds, or sweep‑based FDs.
- Automate: Treat this fund as a non‑negotiable “expense” and set up monthly transfers.
With a solid buffer, you avoid forced sell‑offs and give your portfolio time to recover.
4. Diversify Wisely Across Asset Classes
“Don’t put all your eggs in one basket” is classic advice for a reason:
| Asset Class | Typical Allocation | Why It Helps |
| Equities | 50% | Growth engine |
| Debt Funds/ Bonds | 20% | Lower volatility, income |
| Gold & Precious Metals | 10% | Safe haven, negative corr. |
| International Funds | 10% | Geographic diversification |
| Real Assets (REITs) | 5% | Inflation hedge, yield |
| Cash & Equivalents | 5% | Dry powder for bargains |
Action Step: Review your current mix. If equities exceed 60%, consider trimming to lock in gains and fortify your defense.
5. Use Systematic Investment to Your Advantage
Rupee‑cost averaging via SIPs removes the guesswork of timing the market:
- How It Works: You invest a fixed amount monthly—automatically buying more units when prices are low.
- Why It Helps: During crashes, you average down your purchase cost, boosting long-term returns.
- Implementation: Continue or increase existing SIPs when markets fall.
Action Step: If you’re comfortable on your expenses, shift 10–20% more of your monthly investments into SIPs during severe downturns.
6. Implement Tactical Hedges
For portfolios over ₹10 lakhs, consider cost‑effective hedges:
- Gold Exposure: Gold ETFs or Sovereign Gold Bonds provide safety without storage headaches.
- Short‑Duration Debt Funds: Offer 7–8% p.a. yields and cushion equity swings.
- Protective Puts: Buying index put options caps downside—allocate 3–5% of portfolio value.
- International ETFs: A hedge against India‑specific shocks; 10–15% global equity exposure goes a long way.
Action Step: If your risk appetite allows, allocate a small portion (5–10%) to one or two of these strategies when volatility spikes.
7. Rebalance at Set Intervals
Market swings skew your original allocation:
- Too Much Equity: When stocks surge, trim back to target allocation—sell the excess.
- Too Much Debt/Gold: After a debt rally or gold spike, rebalance by buying more equities at depressed prices.
Schedule:
- Quarterly Review: Quick check for large deviations.
- Biannual Rebalance: Detailed portfolio review and action.
Rebalancing enforces “buy low, sell high” discipline without emotional trading.
8. Control Costs and Taxes
High fees and taxes can erode returns, especially in down markets:
- Favor Low‑Cost Funds & ETFs: Expense ratios under 0.3% for equity index funds, 0.1% for ETFs.
- Use Direct Plans: Save up to 0.75% p.a. in mutual‑fund fees.
- Harvest Tax Losses: Sell losing holdings to offset gains—reduce tax bills and re‑enter positions after the wash‑sale window (30 days).
Action Step: Audit your fund house statements annually. Switch to direct, low‑cost plans if you’re in regular mutual funds.
9. Keep Learning and Stay Informed—but Avoid Noise
Knowledge builds confidence, but information overload fuels fear:
- Trusted Sources: Rely on 2–3 reputable outlets—e.g., Reuters, Economic Times—for concise market updates.
- Set a Routine: Allocate 15 minutes daily to check key indicators; avoid constant price‑watching.
- Focus on Fundamentals: Company earnings, macro data, and policy shifts matter more than intraday ticks.
Action Step: Unsubscribe from sensationalist newsletters. Curate a “market briefing” folder and check it once daily.
10. Learn from Your Own Crashes
Personal experience is your greatest teacher:
- Keep a Journal: Note what you did before, during, and after each major market event—emotions, actions, and outcomes.
- Analyze Mistakes: Did you sell in panic? Ignore your asset allocation?
- Adjust Your Plan: Update your guidelines—e.g., “If markets fall >10%, buy another tranche of my SIP.”
By codifying lessons, you turn painful losses into future resilience.
Conclusion
Surviving every market crash depends on preparation, discipline, and the right tools. Remember to:
- Study Past Crashes to gain perspective.
- Build a Solid Emergency Fund so you’re never forced to sell at low prices.
- Diversify across equities, debt, gold, and international assets.
- Maintain SIPs and consider tactical hedges during corrections.
- Rebalance regularly to lock in gains and buy dips.
- Minimize Costs & Taxes to protect your returns.
- Educate Yourself while avoiding fear‑mongering noise.
- Learn from Your Own Experiences and refine your plan.
No crash lasts forever—and the greatest wealth in the market is often built in the aftermath of fear. With this practical guide as your blueprint, you’ll be ready to weather any downturn and emerge stronger on the other side.
Source : thepumumedia.com