SENSEX @ 26000; NIFTY @ 7800
- Markets conditions currently down by more than 37% from all-time highs.
- It has been painful because the fall has been very sharp and the quickest ever.
- Market waiting for possible government stimulus, peaking out of COVID-19, development, and launch of the vaccine.
- Margin calls and stops losses are getting triggered in the market.
- ETFs (Exchange Trade Funds) and passive money are getting liquidated.
- Valuations have become a lot more attractive post selloff on a Price to Book and Market Cap to GDP basis. PRICE EARNING and PRICE EARNING TO GROWTH are only at slightly below long term average.
- Country in a state of lockdown – economic activity severely impacted.
- The present crisis has no historical comparable and no financial models are available for the present situation.
- Even though, “ Bear markets have no bottom and Bull markets have no Top”, most of the damage seems to have been done. Markets may fall further but valuations are getting attractive.
- The markets always follow the norm of, “Reversal to the mean.” If the valuations are very high, they reverse to the average and similarly if the valuations go below average (Long term valuations), they will reverse to mean(average).
- The stock market history of not only India but developed markets like the US, which have more than 100 years of history and have seen. The Great Depression, Spanish Flu, 1973 Oil Crisis, apart from the recent crisis and many such crises, have proved the theory of “Reversal to the mean” many times. Post-COVID 19, India has all the advantages- Ideal Demographics, Low Oil Prices, Low-interest rates, low commodity prices. We should recover the fastest post Covid-19.
- Consult your Financial advisor to rebalance and review your portfolio.
- Go back to the basics of Investing – Follow the Financial Hierarchy
- Keep 6 months of Expense in Liquid form- Cash, Bank, Liquid and Arbitrage funds.
- Have sufficient Health Insurance for self and family covering all risks.
- Have sufficient Term Insurance of 10-15 times your annual expense plus your total Debt.
- Calculate your Fund Flow; any upcoming financial requirements or goals in the next 3-4 years should be invested in Debt / Liquid Funds.
- Follow Asset Allocation rigorously based on your risk profile and years to the goal.
- For all your requirements beyond 5 years invest in Equity.
- The world is not going to end. Maintain Calm. You may be suffering a notional loss. It will be converted to a permanent loss only if you book the loss now.
- Past history clearly shows that post steep falls, recovery is also very fast. Most lows get recovered in less than one year and at most in 18-30 months.
- If you don’t need the money, invested in Equity, for the next 3-5 years, you may have nothing to worry about. We have always maintained “Enter equity only with a long term horizon.”
- Don’t try to time the market. Don’t try to sell now and enter at lower levels. Nobody can predict short term market movements. The best experts could not predict COVID19.
- Be more focused on long-term value.
- Don’t invest money in a lump sum but in small parts over a period.
- Instead of investing in direct Equity and creating a portfolio where some shares will do well and some will fare badly resulting in average returns; it may be better to invest in Equity Multicap Funds which are also investing in these stocks and Blue Chips.
Leave it to the wisdom of the Fund Manager to take Buy/Sell decisions and optimize your returns.
To gain from the falling market, Start a weekly SIP for the next 6 months in Five good quality diversified Mutual Funds.