STAGGER INVESTMENTS IN MULTI-CAP MUTUAL FUNDS

The Indian stock markets caught a flu and within a week, it turned out to be a pandemic. The coronavirus outbreak outside China has been growing and the uncertainties of the fear of the virus spreading to the rest of the world is pushing stock markets down sharply. Global stock indices have been extremely volatile and reeling under tremendous passive selling pressure with the Japan Nikkei down 26%, US Dow down 21%, FTSE down 28%, while our NSE Nifty closed 18% down at the close of the week gone by. The Volatility India Index VIX is a popular gauge of market fear and it touched its highest levels since the global financial crisis of 2009 over the potential impact of the coronavirus outbreak by shooting up 25.05% to close at 51.47 levels on Friday. The Nifty index closed the week up 3.81% at 9,955 levels after much disbelief and despair for market men and investors. The huge sell off in the Indian stock market and around the world on the back of this medical risk has also led to decline in international oil prices and countries imposing shut downs, thus consequently impacting investor sentiment. Fundamental thinking has gone for a toss and algo-based selling by overseas investors is creating a ruckus in the stock market around the globe. Central banks around the world are mounting a coronavirus rescue by cutting rates, thereby creating loose monetary conditions for growth to come back and keeping the credit supply chains in place. Will this bazooka be enough to keep the global economy on track is anybody’s guess, but these are tested plans and one must try all options available to come out of this huge medical and financial pandemic. Gold has always been considered a safe asset class and decline in gold prices recently suggests a reach for liquidity moment for investors. The equity markets have priced in the technical recession for the moment and are expecting the slowdown to continue for at least a couple of months in the near term. Though valuations are quite attractive with individual stocks already down 15-40% depending on sectors and market capitalisation, expectation of any V-shaped recovery should not be expected by investors. We have gone into an area where valuations are attractive until the fright stabilises and is alleviated. Since this coronavirus pandemic is a black swan event for the market, it’s difficult for the stock markets to be convinced to take the risk in catching falling knives. From a unsentimental point of view, the deadly coronavirus could also spell huge business opportunities for India as global importers need to find alternative supply sourcing apart from China. While China has been the largest exporter of several products such as lighting, spare parts, electronics, chemicals, toys, etc to the world and if India can capture the export market by imaginative and effective policies, it will be a brilliant win-win situation for our country. The Indian markets recovered on Friday as investors are seeing this historic sell-off as an opportunity to nibble selectively on their favourite blue chips. Our advice would be to stop trying to time the market and invest in a staggered manner in multi-cap mutual funds or select companies like BSE Ltd quoting in the stock market around Rs 350 for the next few weeks.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.