NRI advisers are asking investors to not lose heart or resort to panic selling as the market is bound to bounce back, as it has done in the past.
Indian stock investors have lost in excess of INR50trn ($655bn, £526bn, €599bn) so far this year, as fears over the coronavirus pandemic triggered an unprecedented sell-off in domestic equities.
The market has gone topsy-turvy, with the benchmark Sensex index plunging to 28,266 points on 31 March from a peak of 41,952 points on 15 January 2020.
With everyone scurrying for cover from the dreaded spread of the disease, the negative sentiment in the market and economy going into tailspin have seen a panic selloff since February.
The roller-coaster ride is continuing in tandem with the increase in reported cases of covid-19 and subsequent deaths.
Albeit at a much lower level compared to the alarmingly high toll in Italy, the US, Iran and many European countries.
The global economy will go into recession this year with a predicted loss of trillions of dollars of global income due to the pandemic, spelling serious trouble for developing countries; with the likely exception of India and China, said the United Nations Conference on Trade and Development (UNCTAD) in its report on covid-19.
Best buying opportunity
On 10 March, NRI Adviser reported that “investment advisers in the UAE give diagonally opposite advice on the current market meltdown, as one section advises ‘stay put’ while the other is of the view that this is the best buying opportunity”.
Indian investors are not immune to panic selling.
But veterans, who have seen much volatility and crashes in the past, advise: “Don’t panic. Stay put with existing investments.”
Biju Radhakrishnan, director, FRG Consultants and Chartered Accountants, Dubai, remembers well the stock plunges in 2000 and 2001 when the Indian markets crashed 40% followed by a sustained rally, recouping all losses.
Then, in 2008, the market witnessed the mother of all crashes, falling 52% only to bounce back 81% the next year.
So, he endorses the view of Indian market veteran and wealth adviser Basant Maheswari that “if you are alive 60 days from now, you will regret losing the equity opportunity of March 2020″.
The moment the world finds a cure for the disease, the markets could go to crazy heights.
That’s why most advisers term the record sell-off as a once-in-a-decade opportunity for long term investors, as historically, such times have proven to be attractive for long-term equity investing opportunities.
Bank on MFs and Sips
Binoo Nayyar, chief financial officer, TrendRiser Securities, Dubai, who predicted that the Sensex would cross 46,000 points in 2020, says history will repeat itself.
The advice to retail investors is to top up their regular contributions to mutual funds when stock values are at rock bottom, which has prompted many funds to reopen their plans.
Interestingly, many fund houses are buying into this falling market to cash in on the attractive valuations.
Nayyar suggests fixed income instruments, as they are attractive from a short-to-medium-term perspective, and bonds of up to five-year maturity which will give better risk/reward benefits.
He is more inclined to vote for systematic investment plans (Sips) which are the preferred investment tool to help retail investors reduce the risk of timing the market and average costs over time, by buying more units when prices are low and fewer units when prices are high.
In the current scenario, Sip investors can accumulate units at lower prices, which will lower their average cost of purchase.
What retail investors can do is use the Sip route to buy shares on a daily basis to create a good portfolio, he said.
Nayyar also recommends government bonds as a good choice, as they offer yields in the range of 9-9.5% annually.
NRIs can invest in government bonds, and long-term securities issued by the government of India.
The bonds can be directly purchased from the proceeds available in the NRE/NRO or FCNR accounts.
