COVID – 19 impact on Indian stock market

Indices & Stocks in the month of March 2020 shown high volatility as an impact of Coronavirus Pandemic escalated across India. Globally all asset classes; equities as well as fixed income saw heavy sell off impact. Indian markets also witnessed selling pressure from FIIs, FPIs & DIIs in past few days.

Major index, Nifty 50, have corrected by almost 30% and trading near multi year low level while considering bottom Nifty eroded by ~40% from the peak made on 14th Jan,2020.

In valuation terms our Index (Nifty 50) was trading at 20% premium based on forward P/E before the sell off while bearing in mind yesterday’s close of 8660 it is trading at discount of a quarter percentages.

Normally India VIX (Volatility Index), which is the measure of market’s expectation of volatility, use to trade in the range of 12-25 had made all-time high of 79 and presently trading at 71, signifying the highest volatility in the domestic markets during recent period.

Post the recent fall, Market Cap to GDP ratio has fallen to 52%, the lowest since 2009. It had touched the low of 45% mark after the global financial crisis.

As per ICRA, the overall non-bank advances are estimated at about Rs. 35 trillion, as of September 2019, with exposures ranging from retail individual borrowers to large corporates.
Performance of every sector is varied and depends on multiple factors. Demand across all segment was suppressed due to ongoing economical slow down & now COVID 19 will impact further slowdown in economical activities which would further blow up reduction in demand and funding constraints will result in slower than envisaged growth in this fiscal.

To deal with above scenario, RBI Governor Mr. Saktikanta Das announced a slew of relief measures to lighten the near-term stress in the financial markets because of the Covid-19 pandemic and 21-days lockdown. RBI repo rate cut by 75 bps, reduction in cash reserve ratio (CRR) by 100 bps and enhancement of limits in marginal standing facility along with Target Long-Term Repo Operation  (TLTRO)  of up to 3-yr tenor of upto Rs 1 Lakh cr at floating rate linked to policy repo rate will inject Rs.3.74 Lakh crore liquidity in economy.

Big Question :

For Investors  – When & where to Invest ?

For Traders –  How to trade in this volatility ?

Considering present economical condition, we believe investor should start investing rationally keeping in mind investment horizon of not less than 5 years. Rational investment is suggested as many stocks with good fundamentals are available with attractive valuation. Be aware & focus on quality companies with good product mix along with healthy cash flow in books.

For traders, we will advice to avoid heavy leverages on your trades and keep risk as low as you can afford. 

We strongly recommend to choose their Broker, Advisor and/or Research Analyst wisely. This is the time when expert support is much needed.


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