Trends will improve in the Equity market
ITS HIGH TIME FOR EQUITY Global equity markets have witnessed too many hits in a short time beginning with the US-Iran war this year, a domestic budget which was below expectations, the Coronavirus scare, its spread outside China emanating global growth fears and the crashing oil prices. The sell-off across asset classes has been so sharp that even safe havens such as Gold, US bonds, etc have corrected after the equity market.
The global markets are already starting to discount the worst in terms of the economic impact on businesses due to COVID-19. Prices are reflecting that there is a perpetual earnings hit to companies – while this is not a logical assumption in my view, as is normally the case in times of panic, Investors tend to liquidate positions. In times like these, sticking to basics works best. As the experience of previous sharp falls like 1987, 1992 and 2008 show, markets tend to recover from bouts of terror. I suggest investors to maintain a neutral stance and allocate the Portfolio a large-cap to the mid-cap allocation of 60-40. Markets will swing sharply to the upside if there is a containment of the Coronavirus situation. However, one needs to wait and watch news flow on this front over the next few weeks. For investors, who are below their strategic allocation, the current situation provides a good entry point to come close to strategic allocation taking advantage of market fall. Deployments can be staggered over the next couple of months given that it is hard to pick the market bottom. While investing in the long term, volatility can be used to an advantage. Investing at lower prices provides an opportunity to make incremental alpha. Continuing with existing SIPs will help accumulate more units at a lower price and thereby aid in averaging of price providing an opportunity for making incremental alpha. To sum up wish to boost morale of Investor’s don’t panic its high time to look on Equity be patients and stay invested.
M. Vaish(I. F A. )Member of NSE &BSE