India's benchmark stock market index slumped more than 500 points on Monday, with selling pressure seen across major key sectoral indices. After such a sharp plunge, investors are left wondering what's more in the offing for the index.

As a believer in the theory of mean reversion and in most cases, the markets will overshoot on both sides and then revert to the mean. The market topped out in August end at a historically high put call ratio of 2. It kept ignoring brent crude and money market woes for some time but ultimately, the reality prevailed.

Now, this market has given up exact half of the rally it has since August lows. Can it give up 66 percent? It’s entirely possible.

At this point in time, there is a good chance that this market will now overshoot on the way down and settle when the put call ratio goes below another historically significant mark of 1.

There should be no denying that financials have broken down. The Bank Nifty underperformed in the last rally and it is plummeting. You would not want to catch the falling knife as a trader. The rally which preceded this fall outpaced any rally that I have ever seen. So there is good chance that this will unravel more.

And if you are an investor, perhaps now is the time to add some blue chip large caps to your portfolio. Because it’s very rare that you will get the likes of HDFC twins, Kotak etc at the price point which are available now, but purely from long term investment horizon. In the near-term, the market can make absolute mockery of levels.

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First Published:Sept 24, 2018 1:49 PM IST