The Indian stock market continued to decline for the second consecutive day on Friday. The market was down 1,000 points on Thursday and 500 points in early trade on Friday. BSE at 9.24 am Sensex It was trading down 722 points at 59,262.23. Later it recovered to 60,087.20 at 11 am. Mutual fund categories like Banking, PSU Thematic Fund and Value Fund took a huge hit in 1000-point-fall and 1-day Return Several equity categories fell to the downside.

The banking sector was the biggest loser, with SBI, HDFC Bank, ICICI Bank and Axis Bank falling between 3% and 4%. How many equity categories have fallen in a single day since yesterday’s fall:

So what’s happening? Many fund managers believe this to be a minor correction after a lopsided bullish market. Some market pundits also suggested that investors were worried about continued foreign outflows in the past few days after some foreign brokerages like UBS cut India’s equity rating citing expensive valuations. Morgan Stanley yesterday downgraded the ratings of India and Brazil shares to par. Apart from India, several other emerging markets like Japan and China also saw some improvement.

“An assortment of factors such as FII selling, inflation concerns, weak global cues and profit booking is spoiling the party on Dalal Street. And while no one knows how long or how deep this correction will last. If you are a long-term investor, You should look at the current correction as an opportunity to buy and add more to your portfolio,” says Rahul Shah – co-head of research, Equitymaster.

Fund managers also believe that such small corrections are nothing to worry about, especially for long-term mutual fund investors. “Yesterday was expiry day and a lot of things used to happen on expiry day. It is almost a minute volatility in a one-sided bull rally. Basically, nothing seems like we go into a major correction from here. -2% improvement is negligible in such a market. Earnings are coming down now and hence I think there is no fundamental cause for concern at this point of time,” says Nilesh Shetty, Fund Manager, Quantum Mutual Fund.

Nilesh Shetty advises mutual fund investors to focus on their goals and not be intimidated by volatility. “If you are a new investor, understand that such corrections will keep coming. If you are in for a long term goal, then you have to face this phase. Small corrections like the returns equities have given this year are important and investors should not bother,” says Nilesh Shetty.