The markets were already groaning under the impact of the Covid-19 epidemic, made worse by a weak economy and now they have to deal with the collapse of a major bank. It’s no wonder that at one point the wheels appeared to be coming off the market on Friday and it only got worse on Monday. Yesterday, the Sensex fell about 1,941 points to 35,634.95 while Nifty slumped 538 points to settle at 10,451, their biggest one-day fall in history!!
If countries lockdown citizens within cities, it will deal a blow to their economies and if this sort of a lockdown spreads to a few more large economies, the consequences will be adverse. What we are seeing then, the crash in oil, the selloff in equities and bonds, the flight to gold, may just be a trailer to what lies ahead, but much depends on the actions central banks and governments take to restore confidence. Nevertheless, there are some encouraging signs---China is slowly limping back to normalcy. The Chinese authorities said on Friday that outside of Wuhan, no deaths were reported in the rest of Hubei province. The number of new cases in the rest of the country too is coming down, as China comes back to work. Official sources say 90% of state firms are back in business and about half of the small enterprises have resumed work.
Nor are the governments and central banks sitting idle. This week we will have the inflation report, which will tell us whether the Reserve Bank of India has the leeway for more rate cuts, which should be good for the markets.
So what does it mean to us as investors?? Just like Holi, markets have many colours - green, yellow and red!! It is never a straight line but the key thing to remember in investing is to show conviction when it is found most wanting. Yes, it is not easy and hence, very few make money in the stock markets.
The world is gripped in fear and here I am talking about conviction....but do take a deep breath and ask: 1. What has changed in one month? 2. Is this the first time we have had Coronavirus or such panic? 3. And what then happened in the past? 4. Has anything changed in your goals?
And oh yeah, what if you do have some cash....don't run away from the markets, start licking your lips and let's hunt for bargains that will make big gains in the future. Market declines are a Darwinian moment. Those who can evolve mentally get fitter to create wealth from their investments. Those who can't get past that first shock get winnowed out of the gene pool of equity investors.
As the world enters a phase of unpredictability, the choice is yours.
This is NOT the time to worry about your returns. Higher returns are only earned by climbing the wall of worry....Get your hiking gear and let's ascend this wall of gloom!!
Source: Moneycontrol, Valueresearch