Invest in stock markets now and reap the benefits in 3-5 years

Invest in stock markets now and reap the benefits in 3-5 years
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The COVID-19 pandemic has resulted in a slide in equities, commodities and debt markets across the world. The current situation is comparable to the Great Depression of the 1930s and the recession of 2008. The worst is yet to come. The economic fallout of the epidemic may be far-reaching. Yet it is not the end of the world. When the world strives for a solution in unison, it has to happen.

International banks are taking quick steps to tackle the crisis. The United States, Japan and European countries have announced stimulus packages worth billions of dollars to ensure money supply and salvage aviation, tourism and MSME sectors. The aid has bailed out many sectors from imminent doom. The stock market took the cue and recovered from its lows by the end of April. Indian markets tracked global trends. The markets which fell about 30 per cent in March have recovered 16 per cent in April.

Invest in stock markets now and reap the benefits in 3-5 years

The markets are expected to remain at the April close levels for some more time. It could dip further before regaining stability. In case the epidemic runs riot, the markets could slide again. The lockdown has helped India rein in the disease. If we are able to keep pace, we could expect a recovery in the coming quarters. India has strong factors to help in a speedy recovery.

India’s economic growth is driven by domestic consumption.

About 30 per cent of the GDP is contributed by the services sector. Automation and the emerging work-from-home culture will expedite the recovery in the sector.

India’s youth and technology companies are quick to adapt to the realities. TCS has offered work-from-home options to most of its employees for two years.

Monsoon is expected to be good this year. That would help crops.

The next few weeks are crucial in controlling the spread of the coronavirus. The period will decide the health of the economy in the coming quarters. The government has already announced a stimulus package. Many of the schemes are already being implemented. More schemes are expected to be launched as the situation demands. The Reserve Bank of India is also implementing needy measures. There is more to do. Another package is awaited. The economy will be hurt when all sectors come under pressure.

Invest in stock markets now and reap the benefits in 3-5 years

A 10-12 per cent correction in Nifty from the 9,300 level offers an opportunity to build a portfolio of quality stocks. FMCG, pharma, speciality chemicals, paints and some leading banks may be good picks.

Something to cheer

Indian rupee has stabilised against dollar with record reserves.

The crude oil prices is at a 10-year low. Crude makes up a lion’s share of our import bill. The price slide will help in economic growth.

The Nifty 12-year forward PE is below the long-term average.

Market vale and domestic product stand at a ration of 60 per cent, the lowest rate in 10 years.

The Nifty midcap 100 has fell 41 per cent from his life-high. The index has fallen 23 per cent from the December level.

Since the crash in 2008, the Nifty 50 recovered 92 per cent in 12 months.

Two of the five stocks in Nifty are down 35 per cent to 40 per cent from two-year highs.

In short, this is a good time to invest for three to five years. New investors can invest half of their funds now and the rest in stages. Investors aiming high-risk instruments can include midcaps in their portfolio. Those with mutual fund SIPs can increase their investment amounts. If you had missed opportunities to enter HDFC, Kotak Mahindra, Infosys or Hero Motors, you could consider buying into those stocks at current prices. Buy wise instead of selling in panic.

(The writer is a managing director of Acumen Capital Markets)

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