200426 – The previous article ‘Sell that house you own and invest in shares’ invited varied feedback from investors. Since it’s quite simple to get in touch with us, people feel free to send us an opinion. Ya, sorry if I don’t respond to all of them since it’s humanly impossible for me to reply to all. I make sure all clients get replies from me as a preference.
Let’s come back to the topic. I sincerely feel you should once again read the above article before proceeding with this one. It was posted on 14-March-2020 when the panic was setting in, the crux of the post was that continue your investments, add on dips if possible, and surely don’t stop your SIP’s since once the panic lows are made we may also see similar sharp recoveries.
Ten days later, on 24-March-2020 the #Sensex saw a low of 25639 and the #SmallCap Index hit a low of 8622. Today, as I post this article, Sensex is at 31327 and Small Cap Index at 10633. You can calculate the quantum of recovery yourself.
The market is still reeling under #CoronaImpact, which has to be felt by the whole world. Three airlines have already filed for bankruptcy till now. Read the names here: https://www.facebook.com/MostWantedIndian/posts/10216111884102706
Expect many companies to wind off once the economy opens up. Keep in mind one companies pain will be other companies gain. Small companies in India will also feel the pain, but I think the impact on the Indian economy will be the least among all economies in the world. Thanks to our population.
Don’t go by what Raghu Ram Rajan or other similar disgruntled people write and say. Also, don’t pay heed to the people and politicians who are saying India is not fighting well the #Covid19. They will give you useless explanations that India is not doing enough tests, etc. All these are crap. Corona takes 14 days to show up, 28 days to kill if not checked. We are under lockdown for more than 40 days. If India was not doing well, we would by now be seeing 50000 death daily.
Hence, I expect the govt to open up places from 4-May-2020. The decisions will be left to the state govt’s since states like Maharashtra, Tamil Nadu and Rajasthan, Gujarat may not open up soon. Places like religious places, bars, restaurants, schools, colleges, malls, theatres may remain under lockdown for some more time.
So the bottom line is that markets will remain volatile. Though we recovered a lot, we will continue seeing up’s and downs. Ride the trends with regular purchases. Don’t stop your SIP’s and monthly investments.
Mr Chirag Patel of ICICI AMC gave an interesting example in a conversation recently. Markets are cheaper compared to the economy, and the markets have to follow the economy finally.
Assume a man is walking his pet and going to someplace. The strap to which the pet is tied up maybe a metre long. So what happens while walking? You will find that many times the pet is walking ahead of the man, and many times the pet is behind the man. But in the end, both the pet and the man reach the destination.
Here the pet is the market, and the man is the economy. In the short term, the market may move ahead or behind the economy but finally will do what the economy does.
Indian economy had started doing well in Dec-Jan-Feb and will continue recovering again once the Corona Impact is behind us, and the market will follow, it has to follow.
Remain invested. The ride will be a roller coaster one.
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Vivek Karwa, +919841036524