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The indices have lost close to 19.5 per cent from peak levels. In fact, on Friday, they hit the lower end of the circuit filter, making the loss almost 30 per cent from highs.
At these levels, it would not be wise to sell. In fact, the indices do not even reflect the true and correct prices for the broader markets. Some stocks like ONGC, Indian Oil, PNB, GAIL etc.., have never witnessed such prices. The dividend yield on some of these stocks is now 8 to 9 per cent.
The spread of the coronavirus has truly taken a toll on the markets. The speed and ferocity of the spread of the virus and the market crash has taken even the most astute investors by surprise. The World Health Organisation declaring the Coronavirus as a global pandemic and the crash in crude has combined to produce a perfect storm in the market.
The problem right now is that no investor can predict the extent of the damage. What is sure is that the hospitality and aviation sector are bound to get impacted. We have seen several stocks from these sectors crash to 52-week lows, including the likes of SpiceJet, Indian Hotels, EIH, Lemon Tree Hotels etc.
Difficult to predict
The coronavirus is a great unknown. No amount of quantitative easing and cut in interest rates is likely to help. How far the disease will spread and how long will it linger are questions for which we do not have satisfactory answers.
Investors who have been holding onto shares should continue doing so and not sell in panic. In fact, it maybe a good idea to keep adding to your portfolio some very high quality marquee names. It's also important to remember that one should not stop their Systematic Investment Plans or SIPs. The current period is likely to be a very difficult one for the stock markets and there is little doubt of that.
Eventually, one would have the infections abating at a rapid pace. In fact, in India the infections of around 80 odd are far lesser when compared to places like Italy and South Korea.
What to buy after the carnage?
It's important to stick to the quality players, who have a proven track record. For example, stick to the leaders, which have the potential to generate solid returns over the next 5 years or so. There are several stocks, which are now exceptional on dividend yields. One could look at buying the same as well. Stocks that benefit from the present mayhem are good bets. For example, a crash in crude prices is likely to benefit oil marketing companies, which in any case pay solid dividends.
In fact, there were more than 1,000 stocks on the NSE that touched a 52-week low on Friday. Of course, some of these have recovered from the lows, but, still are nowhere close to their 52-week peak levels. The market recovery is likely to be gradual rather than swift. So, one would need to be a lot patient.
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