Kovid -19 Impact on equity market

What to do now – Buy, hold or sell??

Everyone is worried about the future course of action in the stock market or mutual funds. What will happen next?

The key reason of fall in the market is spread of Karona virus popularly known as Kovid -19 and problem in Yes bank. The key reason of worry is that it had spread all over the world and created lot of tension/panic. The problem is fuelled by declaration of it as Pandemic by WHO. Pandemic means epedamic spreading wings all over the world.

This volatility tests your risk appetite, how much risk you can bear at any point of time. That is why we suggest for asset allocation as per risk appetite. It differs from person to person.

The most important fact is that one size cannot fit all. It is personal finance and so same recommendation and advice does not fit for all.

With a past experience of 28 years as financial advisor, I can assure you that there is no need to get panicky. It is a regular feature of the market to remain volatile. I had seen so many of such volatile sessions during the tenure of my business. But it depends on your thoughts that you tend to withdraw and book losses or like to invest and average out your past purchases.

Indian markets have seen downfall of nearly 23% from the peak in the past 20 days. Do you remember the past falls and how severe they were vis-à-vis the current one, let’s have a look.

Sensex saw many corrections of more than 25% in the last 40 years:

1992 – 54%

1996 – 40%

2000 – 56%

2008 – 61%

2013 -28%

2020 -23%

Still sensex grew from 100 in 1979 to 42000 i.e. 42 times in 40 years

Average returns of 15% CAGR.

The pain to see losses in one’s portfolio is huge, but if you analyse and understand, this is notional loss and not real one. I am considering this market fall as an opportunity to invest in equity markets.

Our advise to investors to stay invested. I would like to remind you that when we invest in mutual funds, we like to enjoy the expertise of the fund manager, who is managing our portfolio and doing the sale and purchase of equities as per the scenario prevailing in the market. So let’s have faith in the fund manager whom we had given the funds to manage.

So please do note that this is the time when you can shift your liquid funds to equity is small trenches as no one knows where the bottom is. I am shifting my own liquid funds to equity in small trenches.

The past experience suggests that whenever the fall was there, the recovery in the coming years rewarded the courageous ones.

Rajesh Guliani



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