Selling has been overdone, market is nearing a bottom

Stocks once again crumbled on Monday and there was complete chaos. The trading has been halted twice over the last fortnight - earlier with the Nifty hitting a lower circuit and today the Sensex. One needs to understand that market volatility cannot be contained by curbing or banning short sales. Shorts are a must in the system. That said, the way markets have corrected - steeply and sharply, the recovery will also be in the same fashion. It is not a slow correction. There has been panic selling as people think everything will be shut and it is going to be a permanent situation. I don't think this shutdown is permanent. Things will change for better and hence, there is no need to panic.

Investors should take a heart from the fact that there are countries, such as China and South Korea, where normalcy is returning. It must be noted that there is a peak of any crisis/situation and then comes the plateau.

I believe selling in the markets has been overdone. So, there will be a rebound. For long-term investors, the present market gives an excellent opportunity to buy. Whenever the market corrects and hits bottom, it normally takes up to six months to stabilise. We might be near the bottom and we will realise this in the next one-two years when the indices trade much higher from the current levels. I am not much worried about the markets.

===========================

 AK Prabhakar is the head of research at IDBI Securities

(As told to Swati Verma)