Where should I invest now ?

With increased volatility the market wide impact would have deterred your equity portfolio returns and this could get more volatile with the VIX (annual volatility index) being at an all time high, will also make your investments more volatile over the short term.

Although the swings started with global factors , it will get more domestic in the coming months and the volatility is expected to remain high.

What Happened During The SARS Outbreak ?

Because of lower exposure to China’s economy compared to peers India was the only Asian economy that didn’t have a major decline in it’s growth due to the SARS impact in 2003. It’s expected to have a similar effect this time as well if the pandemic is contained in the country.

What to expect in the coming months ?

The pace at which the government takes measures will be closely watched , the demand scenario which was already weak will get weaker. The contagion which is already developing will make people more averse to traveling and vacationing , people will switch to modes of entertainment at home, stocking up on essentials and this will impact a growing economy to a large extent. Automobile sales will plummet as it did in China. This is bound to make the market a risky asset class to invest in the short term.

How have markets responded previously ?

While past rebounds can’t predict what will happen in the future. In the past, markets have rebounded after the peak of the outbreak.

Currently the COVID-19 situation looks more grim than the previous outbreaks and it is difficult to predict it’s peak.

The markets were trading at life time high valuations 60 days back (NIFTY P/E : 28.56) and a correction based on fundamentals was expected. The outbreak has just hastened the fall. However long term investors should stay put.

The long term fundamentals of the markets still remain intact , yes there had been pockets of overvaluations in certain large caps , this correction will only make the markets more attractive. Long term investors shouldn’t be deterred with the dips in their portfolios and should be looking to invest some more when the market becomes less volatile.

HAPPY INVESTING

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