Sensex highest closing ever was 41,952. Today it closed at 35,634. That is more than 15% drop from the peak. Is it time to worry? Is there going to be a recession soon. Should we sell all our stock and buy lots of non-perishables, for the world is going to end? Nah, nothing like that really. Silly you, it is just a mere 15% drop from the peak. Keep your pants on and don't panic.

On the other hand, are you are thinking, this seems to be the right time to invest, let me move all my money into equity and mint money when the market is back up? Again, silly you, the market still seems pretty over valued, at least in my opinion. Don't do anything silly that you might repent later. How do you even know if this is the bottom. What if the markets fall another 15% and then another 15%? Will you still be fine with it? If so, go ahead. Do what you need to.

For the rest of the folks, continue with your investments as usual. Nothing much to see here. Markets tend to over react over silly things either going up too much (remember 2014 elections when Modi got into power?) or falling too much. This is a lesson in investments. Sensex and Nifty PEs (price-earning ratios) are still higher than historical averages. The only saving grace is that mid-caps and small-caps are near historical averages. That still does not mean the market is offering juicy bargains. Of course PE should not be the only yard stick to measure market conditions, but just saying.

However, I can sympathize with you on the condition of the market. Starting from Kingfisher airlines, diamond merchant fraud, NBFC debacle to several other credit downgrades, bank frauds, Yes Bank's moratorium, COVID-19, poor GDP data, and the latest oil crash, everything looks like bad news. We have been having bad news for a long time but the market never really cared. It kept on going up beyond reasonable valuations. Here is to hoping that at least now the market will correct to right valuations.

What many people fail to recognize is that the market has not seen drops like these in a long time and everyone has become complacent. For the past 5 or 10 years, the markets have not been volatile for some strange reason. The big drops are very infrequent these days. Way back in the day, they used to drop a lot quite frequently and people were used to it. Now a days, just one 5% drop and people panic like headless chickens. Strange! Just look at the volatility index for the past few years, it is so low. Something must not be right.

Volatility has been lying low for the past few years. Source: Moneycontrol

In the meantime, I still suggest that you continue your SIP as usual. Don't stop now. The best time to invest is when the markets are going down. That does not mean you sell everything and invest. Just follow a systematic plan. Invest every month or bi-weekly or what ever your strategy is. If your asset allocation is not inline with your planned allocation, do re-balance. Beyond that I cannot offer any advice in these conditions. Call me cynical, but I am really looking forward for the market to go down further. But for all we know the markets can be up 5% tomorrow.