Greetings,
If I had
asked you, dear investors, about a month back
“What would you feel if you could
buy Indian bluechips like HDFC BANK, ITC, RELIANCE, TCS at 25 % less” ?
You would have jumped up from the seat and would have exclaimed “Oh…I would love
that”.
Good Monsoon,
Corporate Rate Cut, Good Liquidity, Interest Rate cut, IIP improving all these
positive things were just about converging to give Good returns to Equity
investors when COVID-19 (Corona Virus) hit like a Tsunami.
Tsunami is
too mild a word as this pandemic has left in its trail brutally devastating
affecting more countries than World War II. And its not even over yet !!!
Unprecedented
fear and panic gripped investors is evident in the ferocious fall in the
Sensex/Nifty. Not just bad companies,
good companies and even great companies were pretty much thrown away by Panic
stricken investors.
Even Gold
was not spared.
Pretty much
every asset class demolished.
Millennial
investors who had never seen a True Bear Market and were displaying false
bravado on every fall got a real scare and a lesson which I learnt way back in
1992 itself.
Last month’s
dream of 25% fall is now a reality and has actually turned into a nightmare as the
fall has been much more than 25%. The fall has been lethal, lightning quick, ferocious and across
the board where even the Bluest of Blue chips hasn’t been spared.
Many experts
fear that this could lead to World Wide Recession !
CORONA is
bigger than 9/11, bigger than 1918 flu pandemic, bigger than the Great
Depression of US.
It’s pretty
obvious that many economies across the Globe is affected including India but is
the damage permanent?
Beyond
Repair?
Absolutely
Not !!!
Yes...it
will take time but Humans have seen these kind of disasters before (1918 flu)
and come out stronger.
CANNOT
ANTICIPATE FOR UNKNOWN
In 1942, in
a German unit, there were 104 Tanks. Most sophisticated and technologically
advanced. But, shockingly, right at the time when it was most needed in a
Battle, only 20 were operable.
Engineers
quickly found the issue.
During weeks
of inactivity, Field Mice has nested inside the vehicles and eaten away
insulation covering the electrical systems.
Germans had
the best equipment but were defeated by...err...mice.
No engineer
had anticipated this !
How could
they ?
EXPERIENCE
SAYS :
One thing that
I have observed in my 29 years of Stock Market Experience that whenever equities
fall rapidly especially due to a panic or an exaggerated event, the bounce back
has been equally lightning quick.
Being in the
2nd stage of the Virus, in about a month’s time, we should be CORONA
VIRUS FREE (just like China is today) and then the bounce could happen. Whether
it will happen immediately, before that or after that is a mere guess but IT
WILL HAPPEN for sure.
If you have
observed GOLD too has fallen by 15% but when I meet investors and ask about
their view on Gold, they are actually happy Gold has fallen and intend to buy
more.
Why give step-motherly treatment to Equities ?
In fact, history has proved time and again that Equities beat Gold by a fair
distance in all time frames across geographies.
The accompanying
graphs shows how the Markets have always bounced back and that too with renewed
vigor.
So apt to remember Baron Rothschild famous advise "The time to buy is when the blood is running in the streets".
The full statement was ...
THE TIME TO BUY IS WHEN THE BLOOD IS RUNNING IN THE STREETS.....EVEN IF IT IS THE BLOOD IS YOUR OWN"!!!
WHY ARE PROMOTERS
INCREASING STAKE ? !!
The
Promoters of Indian companies seem to know something which we don’t know or
choosing to ignore.
Several of
them are INCREASING their stakes in their companies in this battered time.
More than
200 company promoters are making full use of the Big fall and buying their own
company shares at rock bottom prices.
TATAs bought
Rs.569 crores worth of Tata Chemicals
Rs.457
crores of Tata Steel
Rs.178
crores of Indian Hotels
Suzuki has
acquired Rs.135 crores of Maruti Suzuki
Bajaj family
brought Rs.91 crores of Bajaj Auto
Rs.50 crores
of Bajaj Holding
Rs.36 crores
of Bajaj Finserve
All these
purchases by these promoters only goes to prove how much confidence they have
in their company’s growth. Are they foreseeing what we cannot foresee?
WHAT
ABOUT THE GOOD NEWS?
1. Good Monsoon
2. Corporate
Rate Cut
3. Good
Liquidity
4. Interest
Rate Cut
5. Improving
IIP
It seems
that investors and experts alike have suddenly forgotten all the good news.
But once the tide turns…. the experts themselves will be talking about these
positive points and by that time, the markets may have already zoomed.
Media in general hardly reports good news.
Many victims are fully recovered and it clearly shows it is not a deadly disease.
If someone is in quarantine, in a couple of weeks time, chance of cure is very high, but this news was not spread!!!
CARONA IS CURABLE.
What
is the way forward for you :
Someday soon
all negatives will vanish, some businesses may get disrupted, some businesses
will emerge, some fund managers will identify them too along with the existing good
businesses. We need to stay put, don't jump out of the roller coaster during
the run. Every time these downslides are not the same, some will be steeper
some will be less steep. The more the steep fall the quicker the recovery will
be.
1. Be Calm.
I know its difficult when you see your portfolio getting eroded day by day (in
fact, hour by hour) but that’s the best thing to do now. Don’t be tempted to
take action just for the heck of it.
2. DONT USE LIQUID MONEY FOR EQUITIES :
Do NOT
touch your Emergency Fund for investing into Equities just because they are so
attractively valued. Its time to be intelligent not adventurous.
3. DO NOT SELL
If you
are in Cash Crunch, DO NOT SELL your stocks.
Do not
convert your Paper Loss into Real Loss.
If the
stocks/funds continue to sit there, there is definite potential of capturing
all future growths.
4. STAGGER YOUR PURCHASES :
If you do
have spare cash/spare money to invest…do not go FULL HOG right now….Invest
about 25% and stagger your investment.
5. DO
NOT STOP YOUR SIP.
Don’t make the absolute silly mistake of stopping your sip.
6. TAKE A LOAN IF REQUIRED :
If you
have are in Cash Crunch, you can consider taking a Loan on your Stock/Mutual
fund portfolio.
Yes…there are dime a dozen firms that are ready to offer loans at about 50% of
your equity valuation.
And the rates too are quite decent.
7. SHOW PATIENCE :
Never go
for Spectacular. Be Happy with the Slow and Steady Approach. Believe in being
ABOVE AVERAGE In both UP and DOWN markets. That should be enough.
You've heard the old
adage, it's not timing the market, it's time in the market. And at times
like these, it's really important to remember that.
BACK
TO BASICS :
One good thing that these BIG DECLINES do is…it makes us go back to BASICS.
We should never forget the basics.
In the pursuit of new knowledge…. basics tend to get ignored.
The BEST way
to prevent the spread of the Corona Virus is a simple thing of WASH YOUR HANDS.
And it’s a Basic hygienic thing to do.
But humans do not like to do simple things. They are awed by Complex ones.
And at the
same time, they forget the basics.
To get back
on track, just follow simple basics.
Wash your
hands to kick out Corona Virus
Do Asset
Allocation to increase your overall Returns
BTW, when its equities, be prepared for the
Long Haul !
Regards,
Srikanth
Matrubai
Srikanth Matrubai
Author of the Amazon Best Seller
DON'T RETIRE RICH
Do read the book and give your valuable feedback and request you to post positive comments on the Amazon.
https://amzn.to/3cHUM6M/
You can purchase the book on amazon and flipkart
Please subscribe to my TELEGRAM channel
https://t.me/MutualFundWORLD/
