Just in weeks, the Coronavirus pandemic has skimmed off approximately a third of the global market capitalization. The Sensex still closed 20% below the height achieved two months ago. The worldwide spread of the virus has triggered panic across the world and shivered the spirit of investors.
Covid-19 now a pandemic
On 12 March, China had 29% of the active cases and the remaining 71% of the cases globally. As the situation is recovering in China, Covid-19 is starting to lockdowns in countries like Italy, South Korea, and Iran. German Chancellor Angela Merkel predicts that “up to 70% of the country’s population could contract the Coronavirus”.
The result of this pandemic on global economic growth is going to be enormous. The Organisation for Economic Co-operation and Development has halved the global GDP growth projection for 2020 due to the virus.
Crude oil prices have crashed
For oil-importing countries like India, this fall may be a blessing in disguise.
Gold becomes attractive in uncertainty
As the Global gold prices are rising, the fall in the rupee will push it further in India.
Stick to short-term debt funds
- 10-year govt bond yield is at a 10-year low
Since further yield reduction is limited, it is better to be with short term papers.
- Long duration funds rally may be over
Bond yields are at 10-year low and may not fall further. Short-term funds are better now.
Sensex PE is below its 10-year average
With the market back in the fair valuation zone, long-term investors can get in slowly.
10-year Sensex CAGR is below inflation
Sensex rarely gives negative real CAGR. It has given decent returns after incidents like this.
Sensex at a 2-year low, mid-caps are lower
Due to the deep correction, long-term investors can consider investing in mid-caps now.
5-year SIP returns of Sensex almost zero
Five-year SIP returns of Sensex falling to zero is rare. Future returns have been good.
Investors with higher risk desire can start nibbling at mid-caps, where the cut has been more pronounced. Others can think to get into this segment through the mutual funds.
Just like pharma will profit from the Covid-19 spread, several other sectors will directly benefit from the drop in crude oil. Industries like paints, specialty chemicals, hair oil, cement, PVC pipes, etc. will benefit due to falling in oil prices.