How can I protect my portfolio during a bear market in India?

To protect your portfolio during a bear market in India, focus on defensive stocks, diversify across asset classes, use stop-loss orders, and invest in hedging instruments like gold and bonds. Avoid panic selling and maintain a long-term perspective.

1. Invest in Defensive Stocks

Defensive stocks belong to industries that remain stable during economic downturns, such as healthcare, FMCG, and utilities.

• FMCG stocks: Companies like HUL, Nestlé, and ITC perform well in recessions.
• Pharmaceutical stocks: Healthcare demand remains steady in all market conditions.
• Utility companies: Electricity and water providers generate consistent revenue.

2. Diversify Your Investments

Diversification spreads risk across different asset classes, reducing overall volatility.

• Gold investments: Gold prices usually rise when stock markets decline.
• Debt funds: Low-risk mutual funds provide stability during downturns.
• International stocks: Investing in global markets reduces country-specific risks.

3. Use Stop-Loss Orders

A stop-loss order automatically sells your stock when it falls to a certain price, helping prevent heavy losses.

• Trailing stop-loss: Adjusts with price movement to lock in profits.
• Fixed percentage stop-loss: Limits losses at a predefined level, such as 10%.
• Stop-limit orders: Combines stop-loss with a limit order to sell at a set price.

4. Consider Hedging Strategies

Hedging reduces risk by balancing potential losses with other investments.

• Put options: Allows you to sell stocks at a pre-set price if they decline.
• Inverse ETFs: Gain value when markets fall, acting as a hedge.
• Gold and bonds: Safe-haven assets that perform well in downturns.