Hello Readers!
Coronavirus or (COVID-19), till now almost every individual in the world is aware of it and at the same time are afraid of it also. This is spreading all over the world with tremendous speed. Till now all over the world, we have witnessed around lakhs of cases of coronavirus, hopefully, it is still low in India, but we are not aware of the future.
In last some days we have seen major steps that have been taken in different states and cities of India like in Delhi, Bihar and other states, schools and colleges has been closed, theatres have been closed, both central and state government is spreading awareness to keep good hygiene, in order to protect themselves from coronavirus.
Well, coronavirus is a kind of personal worry which is also becoming a major problem for the markets, it is acting like a roller coaster ride for the market which is already facing the major combined impacts of other events like Global economic slowdown over the last year, and Oil Price war between Saudi Arabia, Russia & US and RBI action on Yes bank.
If we look at these events affecting the market, one by one, then we feel that the noise around RBI’s action on Yes Bank, can be ignored, in fact, we should be thankful that RBI is taking its initiative towards the recovery because of the crisis of Yes Bank, this very thing should boost our confidence in Banks rather than causing a concern.
But here the question is what about the other major events, the economic slowdown, oil prices, and coronavirus? Are they a matter to worry, for one’s investment in the market r say mutual funds?
Well, for individuals who have their investment for short-term, this is a matter of concern for, and for investors who have their investment for long-term, three situations can arise in their mind:
- Things are going to hell in a handbasket.
- There is an opportunity.
- We have seen this before.
Here I will go with the third situation; we have seen this before. Well, coronavirus is not the first diseases, that is affecting the market on the large scale, before this many diseases or virus spread effected the market that too badly, like rubella, influenza, and many more, but the significant point was, the market regained its position, after a period.
Also the fluctuation in oil prices, due to the war between Saudi Arabia, USA, and Russia, is not new, before also there had been wars between different countries regarding the oil price, that affected the economy of India on a large scale, but here also the significant point was market regained its position, after a period.
Why These Events Can’t Be Taken as A Crisis?
If we talk about coronavirus, then eventually its effects are increasing the global economic slowdown, but if we talk about the low oil prices then this can be considered good for the Indian economy, So basically it's difficult to answer, what will be the condition of the market after 12 or 18 months?
Here investors are uncertain towards market prediction and are struggling between their logical and emotional thoughts. As per their logical thoughts, there is evidence to prove that economic systems are self-correcting and recover quickly, but just a mere thought of spreading coronavirus and its threats on the market, are making them emotionally weak towards their investment, and the feeling of crisis, emerges from that.
Can This Economic Slowdown Be Taken as An Opportunity?
Well, this is also a fact, at the time of economic slowdown many advisors suggest, invest at this time as because the market is cheap and so is the units of assets, but opportunities are of two kinds that should be understood clearly:
- market opportunity at an equity asset class level with lower equity prices, and
- specific sectoral opportunities - for example, someone asked me, “is pharma an opportunity now?”.
So basically, here I want to say that your asset allocation should be more based on your goals and should not be based on the market opportunity.
What to do with your Equity Fund Investment- quit or not?
I would suggest if you have around 20-30 % of your investment in an Equity fund, then relax and wait for the market to regain itself, if you exit 50% of your portfolio also at this time, you will have a maximum 6-7% impact on your wealth and that too in a 50% market drop scenario.
But if you have a very high allocation of your investment in Equity Mutual fund, and you are feeling uncomfortable, this may be a time to question that high allocation to an Equity fund. In this case, what more you can do is to wait for the market to regain itself.
We have always advised our investors, invest in equity for the long term and for the short term, park your money in liquid and low duration funds. It helps you to face market volatility with ease. In this situation what I can say you more is watchful towards your investment rather than being fearful.
Also, currently, the health of your family, and you, come first. Stay safe.
You can contact us at Shri Ashutosh Securities Pvt Ltd., for any assistance, we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).