Misjudging market dynamics - why this can be detrimental for investors

economictimes.indiatimes.com:

For example, during the dot-com bubble of the late 1990s, many investors were overly optimistic about the growth potential of technology stocks. When the bubble burst, those who had invested heavily at the peak experienced substantial losses.

There are specific ways of misreading market dynamics that can hurt Indian investors:

Chasing trends blindly:

The hot stock mentality often leads investors to blindly chase trends and over-expect returns without considering underlying fundamentals. In 2021, for instance, euphoria surrounded several newly listed companies. Many investors poured money into these companies based solely on hype, neglecting factors like profitability and growth prospects. This resulted in a correction in 2022, with several companies that previously completed successful IPOs witnessing significant value erosion.

FOMO:

The fear of missing out often leads many investors or traders to enter the market at the wrong time. As witnessed in the recently concluded Indian Lok Sabha elections, the hype created by news agencies, industry veterans, and prolific statesmen, resulted in many first-time investors, cashing in with their hard-earned money to only see a severe market crash on the results day, causing many traders and investors to lose confidence in the stock market.

Ignoring economic indicators:

The Indian economy is intricately linked to global factors. Disregarding crucial economic indicators like inflation, interest rates, and GDP growth can lead to flawed investment strategies. For example,