In these unprecedented times, since the outbreak of COVID-19 pandemic, investors have seen huge losses due to the sudden drops in share prices. Companies have lost enormous in terms of their values and market capitalizations. However, experts are advising investors to stay calm and not panic sell-off their holdings.
In the current situation when the market movements are stung with the outbreak of a virus, investment strategies need to be realigned.
Not All is Bad News
Before discussing about these strategies, know that all is not bad news. There are some positive signals amidst the crashing stock markets.
- As India imports oil, the current fall in global oil prices should bode well for the country. Lower imported inflation and current account deficit will provide the Reserve Bank of India (RBI) to come up with liberal monetary policies.
- For some time now, Indian companies were valued at very high levels in the wake of minuscule earnings growth. Investors shift to quality large-cap stocks made some portion of the markets very expensive. The current fall has seen several corrections providing investors with an excellent opportunity to enter at affordable prices.
How to React in COVID-19 Virus-infected Stock Market?
Here are some strategies that will help you maximize your benefits during these volatile times:
1. Remain Patient
If you start selling your investments during these panicked times, there is a chance to lose opportunities for long-term returns. Even experienced traders and experts are not sure about the depth of the current recession. Therefore, investors are advised to assess their holdings in line with their investment objectives and make informed decisions.
The market volatility is primarily caused due to the heavy selling resulting from panic. However, with a long-term investment horizon may be able to earn higher returns if they remain patient and invest at current price levels.
2. Choose Your Investments Wisely
Currently, the markets are expected to see more volatility as most industries have been affected due to the virus outbreak. Some of these sectors include aviation and travel and tourism.
However, industries like healthcare, fast-moving consumer goods (FMCG), and pharmaceuticals may gain during these difficult times. Shares of companies in these sectors are likely to see upward movements.
3. Stick to Your Investment Strategies
As already mentioned, valuations today are more attractive than a few weeks ago. However, before rushing into buying as the markets dip, you need to stick to your investment strategies and long-term goals. Realign your portfolio to adhere to your asset allocation without excessive leveraging.
You may opt for the barbell investment strategy. This means buying quality growth stocks along with beaten-down shares, such as public sector units (PSUs), corporate banks, and utility providers.
4. Consider Systematic Investment Plans (SIPs)
In the present situation, you may also consider investing in mutual funds through the SIP route. This means you invest a particular amount each month in your chosen funds. It is recommended you allocate your funds in large and mid-cap funds to take advantage of the current fall in prices.
One strategy may be combining exchange-traded funds (ETFs) with balanced advantage and aggressive hybrid funds.
5. Take Calculated Risks
The huge fall in the stock markets provides excellent opportunities for aggressive investors. However, experts advise to take careful steps while making fresh investments even when buying shares at discounted prices. Most people believe the trend to continue for some more time and therefore, it is important to take calculated risks after taking expert advice and remain patient during the volatility.
Historically, there is sufficient evidence that proves investing during sharp market falls provide attractive returns in the long-term. In the present situation, index investing and choosing Nifty Bees or Nifty Futures are likely to provide higher gains.
Thinking of famous quotes of Warren Buffet, the world’s greatest investor, here’s a good one to add: “Be greedy when everyone is fearful and be fearful when everyone is greedy”. The stock market carnage resulting from the outbreak of the coronavirus is an excellent opportunity for long-term investors to buy shares at historical lows as long as they are willing to stay patient and increase their investment horizon for the long-term.
COVID-19 stock market impact can already been visualized across the globe. Let’s hope countries overcome this threatening virus and get back to normal soon.
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