Coronavirus pandemic has hit nearly a third of the global market cap in just a few weeks. This has triggered panic and shaken the confidence of investors.
Although the Indian equity market bounced back on Friday, the Sensex closed 20% below what it achieved two months ago.
To make matters worse, the crude oil war between Saudia Arabia and Russia has affected other assets. Commodities and currency markets are affected severely due to the crude oil war. However, the crude oil war is a blessing in disguise for India as it can cushion the negative impact of the pandemic.
The slowdown in domestic consumption and failure of large financial institutions such as DHFL and IL&FS is still a concern. To add to the woes, we have a crisis in the form of Yes Bank. However, with the help of the government and RBI, a solution will found to resolve the issue soon.
While most of the commodities are down, gold has gone up owing to its demand. A rate cut by global central bankers is also helping the gold demand to remain intact. The demand can go up to $1800 if the Covid-19 is not contained soon. With the fall in rupee, gold offers a great opportunity for investors.
What you can do?
The best way to invest in gold is through gold bonds or gold ETFs. Avoid physical gold.
Stick to short-term debt funds. Government securities are also rallying. Currently, the 10-year US treasury yield is at 0.75% and government bond yield in India is also close to a 10-year low.
Short to medium segment ( 1- 5 years) papers look attractive now. You may consider investing in such segments.
With over 20% cut in the benchmark indices, the equity market is now in the bear market territory and experts suggest investors be cautious and not jump in right now.
The Indian market is out of the overvaluation zone and it may be a good sign for long-term investors. The broader market valuation is below its 10-year average and the 10- year real return from the Sensex is in the negative. If you are a long-term investor with a 5- 7-year view, it is a great opportunity for you to invest now.
New investors can park around 50% of their equity allocation in the next two weeks and the remaining in a staggered manner
Experts are also advising investors to stick to large-cap as it has corrected more than 20% now and you have the safety of margin
While investors with a high-risk appetite can look at mid-caps, others can consider getting into this segment through mutual funds
As the market is going through a low, investors should consider shifting between sectors. You can rebalance from overvalued sectors to undervalued sectors and from sectors with bleak prospects to those with bright prospects such as the pharma sector.
Just like the pharma sector will benefit from coronavirus, other sectors like hair oil, paint, cement, PVC pipes, etc., will benefit due to falling crude prices. Therefore, these sectors are also worth considering while investing.
Covid-19 and other reasons are taking a toll on markets across the globe. If you are worried about your investments, you can contact an experienced financial advisor and seek guidance.