Can Artificial Intelligence Prevent Panic Investing and Selling During Market Volatility?

A machine can lend the individual the composure he lacks — and, if every machine is the same, drain the market of the difference that keeps it standing.

Markets take the stairs up and the elevator down. Panic is not, at root, an information problem; it is a wiring problem. When volatility spikes, loss aversion overrides arithmetic, and the retail investor sells the bottom he had sworn to hold. SEBI’s numbers are unforgiving — the great majority of active traders lose, not for want of data but for want of composure. The real question is whether a machine can supply the composure a human cannot.

At the level of the individual, the answer is a qualified yes. It is the logic our Balanced Advantage Funds already monetise: a systematic rule that leans against the crowd harvests “behavioural alpha” precisely from those who chase tops and flee bottoms. An agentic guardian extends this. It recognises the signature of fear and revenge-selling, inserts friction before the panicked click, reframes a drawdown as a recurring feature rather than a catastrophe, and rebalances without flinching. AI, in this narrow sense, is a circuit breaker on the amygdala.

This is the premise behind a new generation of AI-powered investor protection platforms such as Rakshak by Decimal Point Analytics. Designed to identify behavioural biases before they translate into costly decisions, Rakshak continuously monitors investor actions for signals of panic selling, FOMO-driven buying, overconfidence, and revenge trading. By combining behavioural analytics, machine learning, and real-time risk intelligence, it introduces measured intervention at moments when investors are most vulnerable to emotion rather than reason. The objective is not to replace human judgement, but to strengthen it — providing timely nudges, early warnings, and disciplined decision support that helps investors remain aligned with their long-term goals even when markets are at their most turbulent.

But composure that is identical across a million accounts is no longer composure — it is correlation. Shailesh Dhuri, CEO of Decimal Point Analytics says, “If every portfolio consults the same model, their synchronised selling at the same threshold does not dampen the elevator; it greases it. The very tool built to soften the individual’s fall can steepen the market’s, because herding is fastest when the herd shares one brain. AI can cure private panic while quietly manufacturing systemic fragility.”

The honest answer is therefore the Calibrated Centaur. Put the machine on the human’s reflexes — the impulse, the timing, the friction. Keep human judgement on the system — guarding against the monoculture that turns a thousand calm machines into one stampede. This is the direction in which investor-protection technologies such as Rakshak are evolving: not as replacements for investors, but as intelligent companions that help temper emotion with discipline. Prevent the panic of the person; never automate away the diversity that protects the market.