Its been a year of the complete lockdown all over the country announced by prime minister Shri Narendra Modi, on 23rd March 2020. Yes! Today is the lockdown anniversary!
Well, the irony with March 2021, is that the events are somewhat similar to March 2020. Covid-cases are again rising, indicating towards the second wave of COVID-19 spread. India saw 46,951 new Coronavirus infections being reported in a day, the highest so far this year, taking the nationwide COVID-19 tally to 1,16,46,081, according to the Union Health Ministry data, updated on Monday.
The second event that is similar to March 2020, is that Indian markets are again facing volatility. In March 2021 it has again dropped by about 5 percent from its respective highs.
Investors are getting worried because of two reasons, first because of the volatility in the market and second the possibility of further lockdowns due to a rise in cases and a delay in economic recovery.
Their worries force them to rethink their investment, they are confused about what to do, whether to buy more because of dips in the market or cash out their investment?
Experts Say Investors Need Not Worry!!
On one side investors have their reason to worry, while on other side expert says that investors need not worry, India’s long-term story is still intact and they can use the dip in the market trend to get a good number of units added in their portfolio.
Experts Views On Market Sentiments!!
They say market sentiments have been badly affected due to the rise in Covid-19 cases again and that too in some economically strong states like Maharashtra. Due to which partial lockdown has already been effective in some areas of Maharashtra that have affected economic activities in such region. All these restrictions might have its impact on growth projections for the fiscal year 2022.
The covid-case count reported in the last some days shows that it is now spreading outside Maharashtra also, and eventually, it will affect the mobility in these states. The effect on economic movement in these states will lead to more dip in contact-based services and a near-term delay of normalization.
The Nomura India Business Resumption Index (NIBRI) dipped to 95.1 for the week of March 21 from 95.4 the previous week (previous: 95.7), 4.9pp below the pre-pandemic normal.
However, experts said that there are many other events going through the globe that will help support the growth of markets globally. They said a medium-term blow from the lagged impact of easy financial conditions, fiscal activism, strong global growth, and continuing vaccine momentum should support real GDP growth of 13.5 percent year-on-year (YoY) in FY22, up from -7.4 percent in FY21.
Strategies That Experts Suggest Following!!
Experts say that when inflation rise by 2-3%, then equities generate positive real returns, but as soon as inflation rise by more than 3% Equities positive returns get affected. In the case of a corporate fund or debt funds they deflate once the cost of the fund starts rising, this also affects their interest servicing capacity to deplete. The rising interest rate thus proves to be harmful to the equity markets.
Then where to invest in these scenarios? Well, experts say, in this situation, treasury bonds can be taken as the safest option, and investors generally look toward these securities in times of recession. And when the market starts showing signs of recovery, they shift their focus towards risky assets.
Basically, covid-19 cases are rising, which will affect the market trends and the market will face challenges, but the fact is that the challenge will not last forever!! Instead, it will persist in the market for some time say till the end of March, but next month onwards, the uptrend will resume. And will increase investor movement n decent equity mutual funds and stocks to generate high returns.
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(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).