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Current Market Scenario & How To Invest?

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There are a lot of people who had missed the bus in March-2020 to invest and are now expecting a correction in the markets to start investing. But before that let us rewind what happened in March-2020. We would like to remind you of what we said in the year 2020 about the Corona Virus impact on stock markets.

We wrote “The stock markets worldwide in March-2020 was impacted by a Black swan event which turned out to be the Coronavirus.

The global stock markets had been hitting lower circuits and Indian markets were also no exception. People were running for cover looking for safe heavens like Bonds and fixed deposits and were unwinding their equity positions in a loss as there is a fear that this will keep going down any further.

But there were a few contrarians who did what an average retail does i.e use that free fall as a buying opportunity and they are laughing all the way to the bank”. But to do a contractarian action you need to have the best stock advisory who will not only guide you but also handhold you.

While the Corona Virus was a god sent opportunity for a lucky few who had the guts and patience to invest for the long term there were some unlucky ones who missed the bus out of fear and irrationality. They forgot the golden rule that one can make money when the blood is flowing in the street.

People will do well to remember the phrase “ Buy when others are Fearful” which has certainly worked for long term investors. The best recent examples are the Corona Virus Pandemic last year and the steep fall in global markets in 2009 during the sub prime crisis. Those who had invested in those steep corrections have made big money when the market sentiment turns positive.

But if someone is a trader then he can make tons of money the best way is to trade in Bank Nifty. The Bank Nifty provides a favorable risk reward ratio which should be leveraged to the hilt by all the traders. There are some of the best stock advisory companies who provide Bank nifty trading service which can help you trade profitably.

Those who are trading in Futures & options there are experienced hands who provide trading services in the segment. This is a high risk high reward segment and should be done with utmost care with guidance from best trading service providers.

For traders who are trading in cash segment you should use strict stop loss and exit when the stock hits the target price.

Now in the current market scenario there was strong expectation that the Corona Virus impact is unlikely to create havoc again in India. But to the surprise of the government there is a second wave and people are again going through the same actions that they did during the 1st wave.

Many states like Gujarat, Maharashtra, Tamil Nadu etc. have gone in for lock down due the 2nd wave. This has stumped the Indian stock markets which has remained lackluster since the news of the 2nd Corona Virus wave broke out.

The Indian economy which was expected to jump 11% post the Corona Virus pandemic is likely to settle down by at least 2% to 9%. The Indian debt burden is also quite high and growth is what will stabilize it.

However the problem is the Indian Government has to take debt to increase spending to spur GDP growth. Many governments through out the world have resorted to stimulus measures to help the economy and India is no exception.

While there has been a clamour for another lock down in India the Central government has not imposed a nation wide lock down. However the states which has seen a steep increase in Corona virus cases have imposed lock downs in their states.

Some states have seen a shortage of beds, Oxygen, doctors and vaccines etc which has complicated the problem. The government has taken steps to provide oxygen and we believe the situation is under control now.

The question in every one’s mind is what is the long term solution to this problem and when will there be normalcy. The shortage of vaccines is a major handicap.

People must remember that our population is a staggering 1.3 Bn and it takes time to vaccinate the entire population overnight. We believe that a permanent solution to this problem is vaccination and we would be able to complete the exercise only by next year. Till that time people need to wear masks, observe social distancing norms while getting on with their work.

Now the crucial question in everybody’s mind is how to invest in the current market scenario. While some over cautious investors tend to ignore opportunity coming their way there are others who are over optimistic and punts in the stock markets.

The best way according to us is to invest gradually and spread out your investments. Investors must be stock specific and spot good business with long term potential and invest gradually in such stocks. We would not recommend an investment in one shot at this juncture. However remaining in the sidelines will again result in people feeling we have missed the bus.

Another important aspect is how to handle sectors that are affected by Covid 19 the worst. We are talking about sectors like hospitality which is likely to take a long time to return to pre covid levels. There is likely hood of stress in some sectors which may take at least an year to bounce back. We would again urge investors to adopt a stock specific approach and invest gradually in companies that have strong balance sheets and has the ability to absorb the losses.

We expect the markets to remain tepid for a month but optimistic that business will be as usual in 6-9 months time. The Indian Economy no doubt has good ling term potential and long term investors who stay invested and have patience will reap rich rewards in the medium term.

Happy Investing!!!

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