Why retail investors should hold cash in volatile markets, Pankaj Pandey explains
global economic uncertainty and market volatility, retail investors are being advised to hold some cash reserves rather than deploying all their capital into equities. Pankaj Pandey, Head of Research at ICICIdirect, cautioned that persistent global risks, including policy paralysis and trade tensions, could trigger further corrections in the Indian stock market.
Speaking in an ET Now interaction, Pandey emphasized that uncertainty regarding global growth and inflation remains, primarily due to ongoing trade disputes between the world’s two largest economies. He warned that the market might not be fully factoring in the potential risks, making it prudent for investors to maintain some liquidity.
«Our sense is that some amount of cash is not a bad idea at current levels because what we are still not factoring in is the global policy paralysis,» Pandey explained. He further highlighted that historical market trends indicate an average correction of 27% in midcap and Nifty stocks, lasting for about seven months, making it crucial for investors to brace for potential volatility.
Cash Buffer: A Safety Net for Investors
Retail investors, particularly those with a lower risk appetite, can benefit from holding cash in times of uncertainty. Keeping liquidity handy provides flexibility to take advantage of market dips, allowing investors to enter quality stocks at attractive valuations.
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