Skip to main content

Beyond Disruption of Covid 19



The global economy has locked down and experiencing unprecedented uncertainty and volatility. Accordingly, it is ideal for everyone to ensure that we are mentally and financially prepared to face what lies ahead over the next few months.

Managing Personal Finance: - In the waft of this financial fall let us look at the important aspects in our personal finances

1)   Emergency Fund: - It is utmost important that our emergency fund is kept intact. Seeing stock prices fall, we might be tempted to invest this fund but please don’t make that mistake.
2)   Asset Allocation: - One should stick to asset allocation, in this situation both equity and debt must be maintained as per one’s own asset allocation plan.
3)  Review Financial Institutions: - The second order effects of this unprecedented volatility will be felt on credit markets and fragile financial institutions. One must ensure, the banks we deal with have sound financial conditions and the same applies to our brokers where we have our demat accounts.

Dissecting the Market: - When the world is grappling with Covid 19, what stock market is trying to tell us? Sensex has crashed more than 25% in March-2020. The opportunity in this time is that earning yield has first time gone above the bond yield since 2009. But does the current scenario lead us to something in the past? Let’s compare the recent events with past as mentioned below.

Checklist
2002 -2003
2019-2020
GDP Growth
4-4.5%
4-4.5%
Nifty Growth rate
7%,5% and 7% growth in 2000,2001 and 2002 respectively
7%,7% and 5% growth over the past 3 years
Nifty P/E
12-13 times
14-15 times
Interest rates
Interest rates down to 6%
Interest rates down to 6%
Overall sentiment
Fear
Fear
Market Cap to GDP
45
50

If we analyse what had happened in the past, we might be able to understand that we had the biggest bull market rally in the history between 2003 to 2008. We had seen global growth engines firing from all the angles.

With the global supply chain disrupted, central bankers and country leaders across the world pumping immense liquidity to bring back stability in their economies, we might see formation of a bull market in the mid of this crisis.

                                                                                                                                                                          © Statista 2020
As an Investor what we need to do is to buy businesses which will survive in this disruption and will be able see light at the end of the day. Companies which have good management, leader in the sector, having strong balance sheet, less leverage, lower fixed operating cost, having cash in the balance sheet and are innovate will survive. They will become leaders in the next bull market. 


Stay positive and stay safe

Comments

  1. Unknown20 April 2020 at 03:47

    Well articulated , just the point is what is the gestation period before we see recovery.. This is the first time when demand and supply both are going to get hammered. Consumption will take a hit and so will production. I guess we have an year of pain before seeing the recovery in earning.

    ReplyDelete
    Replies
    1. Huseain Bharuchwala21 April 2020 at 05:38

      Yes agreed but one needs to position if he or she can wait for 5 years now my sense is 7960 Nifty which happened on 23rd March we might see that again before the big rise..First rally will be in Debt followed by we will have it in Equity

      Delete

Post a Comment

Popular posts from this blog

Early Upswing

In my previous blog I explained about the first phase of Economic cycle that is the Initial Recovery which lasted for few months.India as an economy has moved to the second phase of the economic cycle that is the Early Upswing. This phase is characterize by high growth and low inflation which last for one year to several years. Here are some of the signs of Early Upswing Rising stock prices :- Stock prices across all the segment starting to rise. Primarily if we see sector wise all cement stocks ,metal stocks,specialty chemicals , 2 wheeler and 4 wheeler stocks ,FMCG space most of the stocks are making fresh highs. 2 things have given boost to the economy one is good rainfall and second is the 7th pay commission. Index is making higher top higher bottom and about to make 52 week high. Business confidence :- Business confidence is primarily rising which can be easily been seen with amount of deal happening in the economy. Assets whether its power sector,metal,Telecom...
Post a Comment
Read more

Is US market expensive?

In my previous blogs I have illustrated the phases of Economic cycle which are; Phase I - Initial Recovery and Phase II - Early Upswing. So let’s go to Phase III - Late Upswing. Watching Dow Jones going all time crossing 21000 mark brings a question in my mind "Is the US market expensive?" We will analyze the information before creating a view using the theory of market cycles and comparing it with Phase III - Late Upswing. In this phase the economy starts to get overheated, business confidence is at the top, unemployment falls, inflation starts increasing, both short term and long term rates tends to rise and stock prices are rising. This is the last phase before the economy goes into "Recession". 1)      Confidence and Employment :- Consumer and Business confidence in the US is at all time high, while unemployment is at all time low. Below mentioned data gives us some insight into the unemployment rate for the last 16 years, being the lowest in 2007 at ...
2 comments
Read more

My Learning so far from Indian Stock Market

Over last 3.5 years of my experience in the Investment Industry equity got the attention of investors for just 1 year actually real estate had stolen the show. Certainly 2014 was an exciting year for the Investment Industry. My experience in the market made me realized to some extent how market operates and how tezi creates excitement and brings people in stock market. People do more of talking and less of understanding when it comes to investment. Most of the frontline stories get popularity followed by news which plays a big role in grabbing people’s attention. One more learning is that lot of people work on tips when it comes to investment so I thought why not share prospective on tips. TIPS! How people want tips! They crave not only to get them but to give them. There is greed involved, and vanity. It is very amusing, at times, to watch really intelligent people fish for them. And the tip-giver need not hesitate about the quality, for the tip-seeker is not really after go...
Post a Comment
Read more