Hello Readers!!

You, me, and people all over the country, currently is going through a tough second phase of the COVID-19 pandemic. This wave is proving to be more dangerous and tragic than the first one. This wave is leaving few untouched, unlike last year.

Not only human life has been affected badly, but due to the biggest cities teetering under the impact, the second wave has also been affecting our economy, obviously in a negative way. Although vaccination drive is at its peak in our, still no one is sure about the end of this pandemic!

The impact of the second wave of COVID-19 on the Equity market has once more raised several questions in the mind of investors. They have again landed in the situation they were last year, whether they should stay invested, or redeem or apply some changes in their asset allocation! Basically, what they should do?

Well, here we are trying to answer some of your questions, with the hope that our answers would be successful in addressing your concerns regarding your equity investments!!

How Much Is The Second Wave Of COVID-19 Going To Impact the Indian Equity Market?

There is no doubt in the fact that the second wave of COVID-19 will have its impacts on the equity market, however how long this impact will remain is not fixed. However, experts say that extent of the impact will depend on the length of this wave. They say it's hard to predict when will Indian market again see a peak in the coming days one thing for sure we are going to witness and that is a slow down in the economic growth rate. Experts believe that most probably it will go down by one percent that is from the previously estimated 11% to something closer to 10%.

If we talk about the impacts of this second wave on Equity markets specifically, then if you might remember the trend in the equity market in April 2021, we saw that the NIFTY kept rising inch by inch, despite the surge in corona caseloads.

Now, coming to short-term volatility in the market, then only a surge in corona cases cannot be responsible, because might be after India notices a decrease in corona cases, this reason becomes irrelevant. However, many other such events are going on in the country that might also be held responsible for short-term volatilities in the equity market, such events are Liquidity, interest rates, company results, international market performance, election results.

Prospects of Indian Market We Must Know!

Well, volatility is market nature and short-term volatility is taken normal if you are projected towards long-term investment. The growth rate of our GDP or the overall economy no matter how you want to measure it matters the most in the end. There will be various factors that investors might be guessing that will affect the growth rate of GDP growth, but what we know is that the actual growth of GDP will be decided by the long-term trajectory of any nation’s equity markets.

Various factors are also held responsible for the growth of GDP in a country and which are growing income levels, low penetration of financial assets, long runway for growth, the ballooning consumer class, etc. and there is no permanent bad impact seen on these till date. Thus, it will be too early to predict right now that whether the current crisis will change any of this more than temporarily.

The Only Key To Calmness In This Crisis, Is Asset Allocation!

As said before, again I will say that this is not the first crisis that has been impacting the market badly before also the market has suffered from the impacts of such crisis, and it has recovered from every crisis, sometimes slow, sometimes fast.

Here what an investor has to is to keep believing in their equity investment and remember that economic growth is a long-term exercise and so is equity investing.  

Taking money out of your equity investment is never an option during a crisis unless you have no other option for liquidity. The strategies that you need to follow in this crisis is, having one year’s expenses in a liquid fund as an emergency fund is the key need of the hour. Ensure this is in place.

A good emergency fund prepared will help you deviate your mind from your equity performance, this should provide some peace of mind.

At last, I would request to you all to keep yourself and your family safe from COVID-19, after all, your investment is growing for you and your family.

Keep reading our articles for more updates on finance and investment!!

For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., 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).