Is the fall over in Equity Markets?
Over last 10 days, I received phone calls & messages from friends and colleagues. Some of them were first time investors, few others with more exposure to markets. Most of them had a common topic in mind “Recent crash in equity markets”. Everyone wanted to know why this is happening & what will be course of things here on? When I experienced Y2008 market turmoil, I also had similar questions in mind, was looking out for answers. Some answers I could judge correctly & some got answered over time only. Today, coincidentally we have social media through which we can share our leanings & experiences. So, sharing my thoughts with all those with similar interests. I have summed up most commonly asked questions during last 10 days. Feel free to ask anything apart from the list. Questions List: 1. 1 day up, 2 days down with +/- 10% moves. Do equity markets work like this? 2. How Corona can have so much of impact on markets? 3. Are equity markets in India (or globe) are pure gambling play? 4. Can the markets go further down below even from Tuesday’s (17th March) close? 5. Is the bottom being made? 6. We are patiently investing using mutual fund SIP’s. So far it was showing green returns, however now some are now showing negative returns. Should we continue/exit? 7. When we can anticipate the recovery & all-time high levels back? 8. I am already invested, my portfolio is in red. Can I average at this level? 9. Is it a right time for lump-sum investments as markets are down? 10. I am new to markets & never invested, is it a good time to start? 11. How much of % funds should be invested in equity 1. 1 day up, 2 days down with +/- 10% moves. Do equity markets work like this? It’s a black swan event. Can happen once in a decade or twice. It happens in all markets across the globe, so any single country including us is not an exception. 2. How Corona can have so much of impact on markets? Corona has brought some cities or countries to stand still. Day to day activities even in India are affected. This will have a drag on consumption, travel, big ticket purchases, outing & leisure. It will result in revenue & profit loss for businesses in India. Any company stock price is significantly driven by profit & loss (i.e. Earnings Per Share) in medium to long term. Reduction in profitability will have natural impact on stock price. On the other hand, we don’t know when world will be able to arrest the widespread. So, there is an uncertainty factor. Investors don’t like uncertainty. Some of them are pulling out their money. This is creating panic with excess on supply side. Though, India has limited impact so far. Indian companies do import/export trades with other countries, those could get affected. Our markets can’t work in isolation, they need adjust themselves with global counterparts. All these factors are putting pressure on markets. 3. Are equity markets in India (or globe) are pure gambling or satta? Short answer -No. Stock prices react based on speculation in short term, it may be called as gambling by few. However, stock price is a function of multiple fundamental, technical and most importantly supply/demand parameters. These parameters will determine behavior of stock price in a longer run. Normally, speculation related noise gets eliminated in a longer term. 4. Can markets go further down from Tuesday’s (23rd March) close? It may. A lot depends on the news flow markets receives over coming weeks. 5. Is the bottom being made? No one including market experts can predict this accurately. However, looking at current market situation & sentiments, it’s very difficult & non-convincing to say “Yes”. Small advice: Don’t try to do bottom fishing in an effort to super time your investments. No seasoned professional has been able to do it consistently accurate. Have a disciplined approach with scattered investments over a period of time. That should be ok. 6. We are patiently investing using mutual fund SIP’s. So far it was showing green returns, however now some are now showing negative returns. Should we continue/exit? This will be worst time to discontinue or exit. However, you may check performance of your mutual fund scheme with its peers. If your fund is under-performing, you may switch to better one. This exercise anyway should be done once in a year, irrespective of a market condition. 7. When we can anticipate the recovery & all-time high levels back? Corona will have impact on Q4 earnings as people not spending great on consumption, travel, auto & other leisure’s. There is also a possibility of poor Q4(FY20) earnings leading to spiral impact on further downside. Every major market fall (be it like Y2008 or 2000) had some intermediate recoveries. Market fall or rise will never be in a straight line. So, don’t get carried away with any intermediate recovery. It will be extremely bold to say – markets will resume firm uptrend anytime soon. Normally, market slows down with speed of fall at fag end of a downtrend & continues to consolidate for some time before starting a fresh up trend. This may take few months or quarters to happen. All time-high looks a distant dream. I would be happy if I am wrong here 😊 8. I am already invested; my portfolio is in red (losses). Can I average at this level? Is it a right time for lump-sum investments as markets are down? If you are relatively new to markets, increase your SIP allocation by 20 to 30%. That should be good as of now. More experienced hands can do it with scattered approach. Be careful with stock picking or mutual fund scheme. If needed, please take an expert advice. 9. I am new to markets & never invested, Is it a good time to start? Absolutely, Yes. You may start with a mutual fund SIP, choose a good mutual fund scheme. 10. How much of funds should be invested in equity If you are new to markets – Definitely not more that 20% of your investable funds If you are you already have some exposure – Up to 40% of your investable funds If you are a seasoned player – Up to 100% depending your risk appetite & underlying market condition 😊. Feel free to express if you have any other viewpoints.
Disclaimer (Mandatory): I am not a SEBI registered investment advisor.
Over last 10 days, I received phone calls & messages from friends and colleagues. Some of them were first time investors, few others with more exposure to markets. Most of them had a common topic in mind “Recent crash in equity markets”. Everyone wanted to know why this is happening & what will be course of things here on? When I experienced Y2008 market turmoil, I also had similar questions in mind, was looking out for answers. Some answers I could judge correctly & some got answered over time only. Today, coincidentally we have social media through which we can share our leanings & experiences. So, sharing my thoughts with all those with similar interests. I have summed up most commonly asked questions during last 10 days. Feel free to ask anything apart from the list. Questions List: 1. 1 day up, 2 days down with +/- 10% moves. Do equity markets work like this? 2. How Corona can have so much of impact on markets? 3. Are equity markets in India (or globe) are pure gambling play? 4. Can the markets go further down below even from Tuesday’s (17th March) close? 5. Is the bottom being made? 6. We are patiently investing using mutual fund SIP’s. So far it was showing green returns, however now some are now showing negative returns. Should we continue/exit? 7. When we can anticipate the recovery & all-time high levels back? 8. I am already invested, my portfolio is in red. Can I average at this level? 9. Is it a right time for lump-sum investments as markets are down? 10. I am new to markets & never invested, is it a good time to start? 11. How much of % funds should be invested in equity 1. 1 day up, 2 days down with +/- 10% moves. Do equity markets work like this? It’s a black swan event. Can happen once in a decade or twice. It happens in all markets across the globe, so any single country including us is not an exception. 2. How Corona can have so much of impact on markets? Corona has brought some cities or countries to stand still. Day to day activities even in India are affected. This will have a drag on consumption, travel, big ticket purchases, outing & leisure. It will result in revenue & profit loss for businesses in India. Any company stock price is significantly driven by profit & loss (i.e. Earnings Per Share) in medium to long term. Reduction in profitability will have natural impact on stock price. On the other hand, we don’t know when world will be able to arrest the widespread. So, there is an uncertainty factor. Investors don’t like uncertainty. Some of them are pulling out their money. This is creating panic with excess on supply side. Though, India has limited impact so far. Indian companies do import/export trades with other countries, those could get affected. Our markets can’t work in isolation, they need adjust themselves with global counterparts. All these factors are putting pressure on markets. 3. Are equity markets in India (or globe) are pure gambling or satta? Short answer -No. Stock prices react based on speculation in short term, it may be called as gambling by few. However, stock price is a function of multiple fundamental, technical and most importantly supply/demand parameters. These parameters will determine behavior of stock price in a longer run. Normally, speculation related noise gets eliminated in a longer term. 4. Can markets go further down from Tuesday’s (23rd March) close? It may. A lot depends on the news flow markets receives over coming weeks. 5. Is the bottom being made? No one including market experts can predict this accurately. However, looking at current market situation & sentiments, it’s very difficult & non-convincing to say “Yes”. Small advice: Don’t try to do bottom fishing in an effort to super time your investments. No seasoned professional has been able to do it consistently accurate. Have a disciplined approach with scattered investments over a period of time. That should be ok. 6. We are patiently investing using mutual fund SIP’s. So far it was showing green returns, however now some are now showing negative returns. Should we continue/exit? This will be worst time to discontinue or exit. However, you may check performance of your mutual fund scheme with its peers. If your fund is under-performing, you may switch to better one. This exercise anyway should be done once in a year, irrespective of a market condition. 7. When we can anticipate the recovery & all-time high levels back? Corona will have impact on Q4 earnings as people not spending great on consumption, travel, auto & other leisure’s. There is also a possibility of poor Q4(FY20) earnings leading to spiral impact on further downside. Every major market fall (be it like Y2008 or 2000) had some intermediate recoveries. Market fall or rise will never be in a straight line. So, don’t get carried away with any intermediate recovery. It will be extremely bold to say – markets will resume firm uptrend anytime soon. Normally, market slows down with speed of fall at fag end of a downtrend & continues to consolidate for some time before starting a fresh up trend. This may take few months or quarters to happen. All time-high looks a distant dream. I would be happy if I am wrong here 😊 8. I am already invested; my portfolio is in red (losses). Can I average at this level? Is it a right time for lump-sum investments as markets are down? If you are relatively new to markets, increase your SIP allocation by 20 to 30%. That should be good as of now. More experienced hands can do it with scattered approach. Be careful with stock picking or mutual fund scheme. If needed, please take an expert advice. 9. I am new to markets & never invested, Is it a good time to start? Absolutely, Yes. You may start with a mutual fund SIP, choose a good mutual fund scheme. 10. How much of funds should be invested in equity If you are new to markets – Definitely not more that 20% of your investable funds If you are you already have some exposure – Up to 40% of your investable funds If you are a seasoned player – Up to 100% depending your risk appetite & underlying market condition 😊. Feel free to express if you have any other viewpoints.
Disclaimer (Mandatory): I am not a SEBI registered investment advisor.
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