The world has suddenly become a different place in the last two months, with Coronavirus or Covid-19 taking a host of nations by storm. RBI cuts Repo Rate by 75 basis points to 4.4% (lowest since 2001), Reverse Repo Rate by 90 basis points to 4%, CRR of all banks to be reduced by 100 basis points to 3% (Lowest since 1962), these three liquidity measures will inject liquidity of Rs 3.74 lakh crore to the system and India also unveils $22.6 billion stimulus plan to ease virus pain.
Indian Stock Market
If It took 3 years for SENSEX to reach 42k from 29k levels (Current Levels) then will it take another 3 years to again cross 42k level? Perhaps not. As per numerous experts, Current market fall can be the best buying opportunity for investors and why not. Forget about small and midcaps, several large-cap stocks of multi-million dollar companies are at trading at the decade lowest price and not just investors but promotors are standing in a queue to increase their stake.
India VIX is a volatility index based on the NIFTY Index Option prices.
This indicator is known as the “investor fear gauge,” because it reflects investors’ best predictions of near-term market volatility or risk. In general, VIX starts to rise during times of financial stress and lessens as investors become complacent. It is the market’s best prediction of near-term market volatility.
This index surged 700% to 84 levels in less than 3 months, you can imagine the intensity of the volatility. The speed with which markets nosedived shook the earth, this intensity has never been witnessed by market participants in the last 3 decades or so. The index currently is at 70 levels.
Why does VIX go up when market goes down?
Answer: When the market goes down, investors would want to purchase insurance, which drives up the prices of put options and increases the VIX. The VIX decreases when there’s less demand for put options as the market rises. That’s why it tends to move inversely to equities.(Google)
If any investor can resist a possible downside of 10–15% from current levels and want to invest his/her money form long term (at least 2–3 years) then here are five stocks you can invest for better returns with lesser risk (All bluechips).
- HDFC Bank Limited (900 Rs.): The largest bank in India by market capitalization as of March 2020.
- Tata Consultancy Services Limited (1850 Rs.): The most valued Indian company by market capitalization.TCS is also 3rd most-valued IT services brand globally.
3. Larsen & Toubro Ltd. (841 Rs.): L&T is among the largest five fabrication companies in the world.
4. Reliance Industries Ltd (1067 Rs): Mukesh Ambani led RIL needs no Introduction, It is the second most valued Indian company by market capitalization.
5. Coal India Ltd (131 Rs.): One stock must be there in your portfolio with a considerable dividend yield. With almost 10% dividend yield, Coal India is the largest coal-producing company in the world.
Remember one thing, this is a pandemic (which we have seen many), not the apocalypse. So if you are a new investor then open your demat account right away and start investing in tranches.
The current situation
In the current situation, the stock market fall, in the global markets and India, is mainly on account of Fear of the Unknown. How much can the situation aggravate, how effectively will countries respond in containing the pandemic, in how much time, and the extent of debilitating effect this entire situation will have on economic activity, trade, and demand.
The market fall this time around has not been driven by any actual financial crisis or economic event. This brings us to believe that Indian markets should respond favorably once the dust settles, the fear and the panic subsides and human and economic activities are restored.
What has complicated the global scenario is that amid the virus fear and panic, an oil war has broken out amongst oil majors, with talks breaking off between Russia and the OPEC, and Saudi Arabia swiftly dropping oil prices and announcing an increase in production, with the intention to throw US shale companies out of gear.
Markets may continue to be volatile and susceptible to daily news-flow and hypothesis with respect to the pandemic, a stage which possibly traders and arbitrageurs will dominate.
What should Indian investors expect from the markets?
If the corona situation comes under control soon, we could see the markets retrace some lost territory. Else, we stand the risk of markets slipping into a long bear phase.
Lower oil prices reduce the current account deficit and a lower current account deficit and lower imported inflation will provide the necessary legroom to RBI to be more liberal with monetary policy in the future. Markets will likely to see growth starting to recover towards the second half of the coming financial year.
SARS-CoV-2 and current condition in India
The SARS-CoV-2 virus has affected more than half-a-million people across the globe, as on early March 27, 2020. The numbers have been increasing by the hour, with the United States recording the maximum positive cases in the world. Italy and Spain in Europe continue to be the most affected countries.
In India Coronavirus Cases are 863 (05:15 pm IST, 27/03/2020), 73 recovered and 20 casualties. The good part is all 781 active cases are in Mild Condition.
According to Balram Bhargava, ICMR Director-General, 80% of Covid-19 patients recover on their own and they won’t even know it ever. 15% showed mild symptoms and the rest 5% need to get hospitalized for supportive treatment.
Businesses and factories are starting to reopen in china, Clear visibility of containment of corona cases, incremental incidents falling and the spread of the epidemic reducing.
Uncertainty doesn’t guarantee danger, stop counting the death counts, stick with reliable resources, rest, sleep, keep calm, drink plenty of liquids and use a room humidifier or take a hot shower to help ease a sore throat and cough.
Stay Home, Stay Safe