Ever since we saw a major bull run in 2008, the volatility in the equity markets has grown exponentially, thanks to internet technology, which has led to instantaneous dissemination of information and also execution of trades.

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Today many investors go overboard in reacting especially to the quarterly results and other related news flows (like M&A rumors, exit from benchmark indices, etc) without considering the valuation parameters seriously.

Thanks to powerful internet platform, even the large cap stocks are not spared – Infosys fell 22% on April 12, 2013 post-March 2013 quarterly results, the worst fall in 10 years. The management guided for 6-10% revenue growth as against the expectation of industry growth of 12-14%. The same stock erased all the loses within 3 months subsequently. Since April 12, 2013, the Infosys stock gave a return of 82%, while the Sensex moved up only by 52%. More recently TCS fell 8.7% on October 17, however, in subsequent 11 trading days, it recovered 2/3rd of the losses.

Volatility is equally rampant in the midcap stocks as well – last month the stock price of Unichem Labs fell 11% in a single day post its September results – but subsequently the stock price recovered 20% as of Friday's close from the bottom of the price post-results. A small consumer product company moved up over 40% in just two trading days about 3 years back due to the rumor of M&A activity, but as the rumor fizzled out the stock fell 40% within few days and even after 3 years, it is giving a significant loss to investors.

DLF lost 28% in a single day only to recover 70% of total losses subsequently in 3 weeks. Of course, the regulatory issues are cause of concern, no doubt – but the question is whether retail investors (not traders) need to sell at such lower prices after the news is discounted by the market so badly?

In India, many businesses are cyclical, hence performances get impacted temporarily. A case in point are the companies, which use base oil (a derivative of crude oil) as the core raw material. A crash in oil price is positive for them, however the cost of materials procured before such crash at higher prices cannot be normally passed on to the end users as they demand the benefit of current fall in input prices. Such companies take a hit on the bottom line temporarily. However, many retail investors come out of such stocks at lower prices before the next quarterly results. For FY2013, a midsized company posted some losses in March quarter, the stock also fell 19% lower next day – however, many investors missed to notice a major structural problem. The company's inventories and receivables were over 110% of its FY2013 sales!, indicating some serious issues in the business itself.

Subsequent to this quarterly result, the stock fell another 75%. We do not rush to take treatment for blood pressures caused by the moment of anxieties – doctors would go beyond those moments before suggesting any medications. Similarly the retail investors (not traders) need to look for any new trend setters from the quarterly results before deciding to exit "at any cost".