Though we have been facing a dip in the fiscal deficit in recent times due to the pandemic effect on the economy, we have an outstanding opportunity to grow our funds.
Jason Arora, Director Master Capital Services says now may be the excellent time to start accumulating and invest if you have money and wait for the market to move, in an interview with Khsitij Anand.
‘If you have money, invest some now and wait for markets to move’
“Most stocks are available at multi-year lows, the investors who want to invest in the market now can select the stocks based on their valuations and fundamental analysis”, says Arora.
Kshitij Anand @kshanand
1) Though the Sensex and the Nifty are in a bear market along with global peers, data suggests that Nifty witnessed a fall of 25-28%. This was before bouncing back. Do you think the negative peek can be terminated here?
A) In the last couple of weeks, the fear of coronavirus has sent the markets tripping over. Although the coronavirus is new territory for us, the stock market turbulence is not.
Many people have lived through several at this point but it doesn’t make any of them less scary. No two stock market crashes are alike but they all have one thing in common–the market recovers eventually.
There will always be turbulence in the stock market as it is cyclical. No one can make predictions about what will happen next and how long this will last. But history has taught us that the market recovers and so do we.
2) Brief us about your experience in a bear market! Is it time to chase the fear? Investors who put money when the market hit lower circuit–say in 2008–have created massive wealth. Are we in a similar situation?
A) The kind of situation we were in 2008 was very similar to the current situation but the market in 2020 is better than it was in 2008 if we compare.
The leverage was extremely high in the system in 2008, as we were in the early stage of an NPA cycle. The crude oil prices before they cracked were also extremely high.
After 2008, the market cap to GDP was close to the historical market bottom. In today’s market, the market cap to GDP ratio is at very low levels as well.
Earnings cycle, profits to GDP in 2008 was at a near peak and now probably last year the bottom has been made.
3) What do you advise your clients–sit tight or buy proactively?
A) Suddenly stocks are much less expensive than what they were only a few times ago. We are advising investors that there are lots of stocks that you wanted to buy but did not do considering the high valuations.
Now the valuations are comparatively looking good compared to what they have been in a long time. It is an excellent opportunity to start accumulating if you have money, invest some of it and wait for the markets to move from here.
The market gives these opportunities once in a while. A long-term investor or someone who is trying to build his portfolio has to start getting into the market now.
4) The good news is that MFs are still receiving inflows, which means that investors trust equities despite massive selloff. Will the trend continue or do you see redemption pressure?
A) Equity mutual fund inflows in February increased to Rs 10,730 crore, the highest in 11 months, even as the broader stock market witnessed concerns over the coronavirus impact and heavy volatility.
According to data released by AMFI, net inflows into equity mutual funds and equity-linked schemes rose from Rs 7,547 crore in January to Rs 10,730 crore in February.
Since March 2019, this is the highest investment when equity mutual fund schemes attracted an inflow of Rs 11,756 crore.
Though Indian investors viewed the fall in the market as an opportunity to buy into equities and invested in equity funds, they also continued to focus on the multi-cap category.
They aim at benefitting from the opportunities arising in all the three equity markets segments (large, mid and small caps) by staying invested in one fund.
Experts expect continued buoyancy in SIP flows in March, too, though given the deep correction in markets, a few institutional investors may reassess their investment strategy.
5) Where is value in this market? Most of the stocks are available at multi-year lows. How should investors decide which one is a better value play?
A) As most of the stocks are available at multi-year lows, investors who want to invest in the market now can select stocks based on their valuations.
Especially, the fundamental analysis of stocks based on the ratios and the past performance of the company will help them get an idea.
Another factor which we can consider at this market level is the correction in the levels of the stocks.
6) A lower circuit and then some recovery on bourses. What is the way ahead for markets in the closest term?
A) The Indian stock market in the first 15 minutes of trade hit a lower circuit last week. Trading stopped across the board for about 45 minutes as markets continued to witness panic selling.
While the investors were expecting another lower circuit of 15 per cent on the indices, the sentiment got changed altogether.
Volatility will remain until markets believe that the peak of coronavirus cases has been reached and that maybe some time away.
Globally, governments and central banks need to step in and bring stability and confidence back both for companies and investors.
Disclaimer: The views displayed either on money control or here are subjective and generic. It is more important to resume calls based on your fundamental analysis for buying shares.