Light at the end of the tunnel!

Fear is creating nuisances for the equity market that is witnessing a deep cut world over. First, it was Coronavirus that hit the world’s second-largest economy thereby, affecting the supply chain of the world market. As China started to stabilise from the virus, other nations get into the grip of it that made the equity market even more nervous.  As the global economy was still struggling, the fallout between the two major oil-producing countries, led to a sharp fall in the crude oil prices, further impacting the equity market.

These developments nipped the nascent recovery that we saw in the broader market in India. NAV of funds dedicated to small-cap and mid-cap dedicated stocks was up by anywhere between five to ten per cent in the first 45 days of 2020. The recent fall in the equity market has wiped out all the gains made by equity investors in the last couple of years. Indices and stocks are trading at 52 week low. There are more than 2,500 stocks that have hit their 52-week low in the month of March 2020. Our analysis shows that the Indian equity market has hardly generated any negative return in the 10-year period.

This fall may be worrying about various investors and making them nervous. Some of you might be thinking to skip a couple of your SIPs till the market stabilises while others might be thinking of redeeming their investments to avoid further losses. Redeeming will make the situation worse and will turn your paper loss into an actual loss.  

Investment in equity is meant for long-term and short-term volatility, which is part and parcel of investing in equity. If your goal is nearing, it is always advised to shift your corpus to liquid fund that is less volatile. We believe, although, that the situation looks precarious and investors with long-term investment should hold their nerves. Once this initial reaction subsides, we will see a light at the end of the tunnel. Firstly, a fall in the crude oil prices is definitely a stimulus for the Indian economy as it imports about 70 per cent of its requirement. If prices remain at this level, it will help the government to improve it's fiscal and at the same time, it will also negatively impact inflation and that will provide headroom for the central bank to take assertive action in the rate front. Both are good for the equity investors in the long-run.