Coronavirus outbreak, volatile stock markets: Not many will be inclined to invest now, saving money will be criterion, say analysts

Is this the time to invest in the stock market given that the stocks are all selling at a low price. The possible growth in the long-term will benefit investors, said experts.

Sulekha Nair March 25, 2020 13:05:06 IST
Coronavirus outbreak, volatile stock markets: Not many will be inclined to invest now, saving money will be criterion, say analysts

The domestic and global markets have been volatile for some time down since the outbreak of the coronavirus . Equity indices have been fluctuating wildly as domestic investors are spooked by a sudden spike in coronavirus cases in India.

On Tuesday, there were two important announcements—Prime Minister Narendra Modi announced a nationwide lockdown for three week in an attempt to stem the spread of coronavirus in India; Finance Minister Nirmala Sitharaman announced several relief measures relating to Statutory and Regulatory compliance matters across sectors. The benchmark indices opened in the green during opening session on the stock markets on Wednesday but since then have been fluctuating in a highly volatile market.

Is this the time to invest in the stock market given that the stocks are all selling at a low price. The possible growth in the long-term will benefit investors, said experts.

The announcement of a lockdown of three weeks coupled with the prevailing global trend, the situation may likely continue for some time, said Abhishek Rastogi, Partner, Khaitan & Co. India will be very cautious after the prime minister’s announcement and this will reflect in the stock markets.

“Liquidity will remain an issue with individual investors and the MSMEs, too,” Rastogi said. He said the mood would be to try and be as safe monetarily as possible.
He does not expect any panic selling and not much buying too in the prevailing circumstances. Instead, he feels that the pressure will be felt much more by small and mid-sized companies. “Practially, MSMEs, small business and even mid-sized 100 cr businesses will be pressurized to retain the salaries of employees. Banks will be face a huge problem as they already have NPAs. Those companies/individuals who are already facing a financial crisis will put more pressure on the economy and banks,” he said.

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Representational image. News18

However, there wont be much rush to buy and invest in stocks, said Rastogi. “People would be in a wait-and-watch-mode and curtail expenses.” Hence, liquidity will remain an issue for next three months.

Single income versus double income families

The markets are going down substantially on multiple valuations. In this environment, says Dhavan, Plan Ahead Wealth Managers, an investment advisory firm said investors who have fulfilled the requirement of emergency provisioning may look at investing in the bourses now.

“This is a time of disruption for a large number of individuals. For them, the financial situation now is an emergency. Double income families need to provision for 6-12 months while single income families for 12-24 months.” After this provisioning is done, the surplus can be invested in stocks and shares, Dhavan suggested.

Stock markets reward patient long term investors. There’s no better way of making money other than owning a great bunch of Indian companies and ignoring the inevitable ups and downs of the market, advises Jimeet Modi, Founder Ceo Samco Securities. “Owning stocks over the long-term is a sure shot way to success! In about 20 years from, a 1,000 points drop will probably look like a small 1-2 percent blip.”

Conceding that a pandemic is a one-off which will, in fact, create an opportunity for investors to create wealth over the next 10-12 year, Modi said, quality companies will create wealth because even after a sharp decline they have shown strength with their stock prices always inching higher. In the long run, when things are under control, markets will recover and the same businesses will be fairly priced again, he added.

Who will invest?

People who have surplus cash in the banks may be inclined to invest in the stock markets now. However, most of them are traumatized by the prevailing situation and may prefer to lock their money in fixed deposit of 45 days, instead.

Why you should not invest money in this market

Do a little wait-and-watch. If there is a dream company share, you wanted to buy, it is the right time, say analysts. However, they said, it will be the promoters who will pick their own shares. “If someone knows the value of his company’s shares are going down, he will buy them,” they said

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