Good Undervalued Stocks to Buy in This Market Crash

The market is red. Maybe it's a small dip, maybe it's a full-blown crash— either way, panic is in the air. Stocks are falling, news channels are buzzing, and everyone suddenly thinks they can predict the future. 

What would you do in such a situation? Well, most people panic and hit the sell button. Smart inventors, on the other hand, start buying stocks. Why? Because a market crash isn't the end of the world, quite the opposite, actually. It's an opportunity to buy great stocks at bargain prices. 

But not every stock that's down is worth buying. Some companies are sinking for a reason, while others are just caught in the chaos and will come back stronger. The key is knowing the difference between the two. To make things easier, we've done the research and put together a list of the best undervalued stocks to buy in a market crash.

Why a Stock Market Crash Is the Best Time to Invest

You may think there's something wrong with the sentence, "Market crashes are a good time to invest". You might even be thinking, "But market gir raha hai, we should pull out". However, you would be wrong on both accounts.

History shows that market crashes are not permanent, and in the long run, the market almost always recovers. For example, the 2008 market crash saw a 52% decline, but the very next year, the market bounced back with a 76% recovery. In the years after, it continued to grow, with an 18% gain in 2010. And this is not an isolated event. 

A 30-year analysis of the Nifty 50 shows that, despite experiencing over 20% drops on 31% of trading days, the index has delivered an 11% CAGR over time. This is proof that the market will always recover and grow, despite the occasional downturn.

The biggest mistake investors make is treating a market drop as a permanent loss. In reality, it's just an unrealised dip— that until you panic sell! Rather than panicking, investors should view it as an opportunity to buy quality stocks at discounted prices. 

How to Identify Good Undervalued Stocks to Buy During a Market Crash

By now, you've probably realised that a market crash isn't always a catastrophe, unlike the social media “analysts” make it seem to be. Instead of running for the exit, it's the perfect time to buy—but only if you know how to spot the right stocks.

First things first, don't just look at the price of market crash stocks. Focus on the company's financial health. A strong business with steady profits over time is much more valuable than one that's cheap just because of a market panic. Companies that have been profitable for years are better equipped to handle downturns and come out strong when the market recovers.

Next, cash flow matters. A company with healthy cash flow can survive the toughest times and bounce back quicker than others. This is a good sign that shows that the business isn't reliant on short-term fluctuations and is built for long-term growth, making it a safer bet during uncertain times.

Finally, do not give in to the appeal of quick gains. It's easy to get distracted by temporary drops, but a long-term strategy will always work better. High-quality stocks usually tend to outperform the random “market crash stocks”. For instance, the NIFTY200 Quality 30 index dropped less than broader markets in 14 of the last 20 years.

As Warren Buffett wisely said, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price". 

Want to make the most of the market dip? Then, our "5 Stocks to Buy in this Dip" report is perfect for you. We've identified 5 good undervalued stocks that are good for the long term. Click here to purchase the report and start investing smartly.

Sectors & Industries That Perform Well During and After a Stock Market Crash

Now, onto the heart of the matter—which sectors actually hold up well during a market crash? Let's be real: not every industry is going to do well when the market dips. But some sectors have better chances than others.

1. Defensive sectors (FMCG & healthcare)

These stocks can be considered relatively crash-proof and have chances to perform quite well, even during market downturns. People always need food, medicines, and essential products— no matter what's happening in the stock market. So, these sectors tend to stay steady when everything else is down.

2. Technology & innovation-driven sectors

As the world continues to go digital, technology sectors like e-commerce, software, and cloud computing usually recover pretty quickly. These sectors are at the heart of innovation and are in high demand, meaning they tend to bounce back strong once the market stabilises.

3. Infrastructure & manufacturing

These sectors get a boost from government spending. When the economy is slow, governments often step in with infrastructure projects to jumpstart growth. This means steady investments and long-term growth for these sectors.

So, when the market dips, sectors like these can fare better.

Key Factors to Consider When Investing During a Market Crash

Market crashes feel like a punch in the gut. The red screens, panicked headlines, and never-ending Twitter debates can make even the most confident investors second-guess themselves. The first instinct? Pull out and wait. But that's exactly what you shouldn't do. Here's what you need to do instead:

1. Don't stop your SIPs

When markets fall, many investors panic and stop their SIPs (Systematic Investment Plans). In January 2025, the SIP stoppage ratio hit 109%, meaning more people exited than entered. But stopping SIPs during a downturn means missing out on investing at market lows.

2. Stay disciplined

Timing the perfect entry or exit is nearly impossible. However, following a disciplined investing journey is any day better. Even our 30-year study on Nifty 50 proves that a simple, disciplined SIP outperformed market-timed SIP with 10% higher ROI. Remember— big money is in the long run.

3. Hold some cash

Firstly, having a cash buffer helps you face financial emergencies. Plus, holding 5-10% of your portfolio in cash at any point in time can help you benefit from further dips, because as American author H. Jackson Brown, Jr aptly puts it—

“Opportunity dances with those already on the dance floor.”

4. Don't trust the media blindly

Think twice before you trust those social media analysts. In market crashes, the media tries to sell you fear. Avoid the noise and stay focused.

If you're wondering what else you should / shouldn’t be doing when the market crashes, we've already done the homework for you. Our report, "10 Things To Do in This Market Crash", is packed with practical steps to keep you on track. Click here to download the FREE report.

The Bottom Line

No matter how smart you try to become during market crashes, the truth has been told— Consistency wins.

A look at SIP investments in the Nifty Small Cap 250 Index during the 2008 crash proves this:

• 5-year returns: 9.23% CAGR

• 15-year returns: 14.05% CAGR

• Till January 2025: 16.46% CAGR

Even if you had started investing at the peak of the market, sticking to a disciplined plan led to solid returns over time. The biggest mistake investors make during a stock market crash is stopping investments, thinking they'll restart at the "perfect time". But the truth is, nobody can predict that.

Instead of chasing perfect timing, focus on steady and continuous investments.

However, let’s be honest, picking good quality stocks for long term, that are at reasonable valuation, and even more, doing that on a regular basis— is a daunting intellectual task. Especially, if you are engaged in some other profession/business, finding time for all this stuff is easier said than done.

But worry not, we do the research work for you regularly, so you don’t have to. With Finology 30, you get 1 long term stock to invest in every 12 days, with regular tracking by our analysts, important notifications and more. This ensures that you have a disciplined investment journey without having to spare much of your time.

Subscribe to Finology 30 and get good long term stocks to invest in throughout the year.