A Guide To Investing In The Indian Stock Market During Coronavirus
The disturbance in the global economy due to coronavirus has resulted in widespread job losses and a sharp decline in business activity all over the globe. Stock markets too saw steep corrections in early 2020, although some made an equally rapid recovery in the second quarter.
According to experts, it is a good time to invest in stocks.
Nikhil Kamath, co-founder of Zerodha and one of India’s biggest brokers said “A lot of the pessimism has already been included in market valuations, with most investors already factoring in worst-case scenarios,”
Hemang Jani, head equity strategist, retail broking, at Motilal Oswal Financial Services Ltd said “There have been four instances, in the last two decades, of correction of more than 30%. In all four instances, six-month forward returns for Nifty 50 were positive while in three instances returns have been minimum 35% and a maximum of 46%,”.
How to Get Started with Investing
“Investing in the stock market is difficult” this is just a myth. In reality, the stock market isn’t as complicated as many assume it to be. It’s easier than ever before to open an online brokerage account and start trading. You need to do is think before you take a step.
Jani finds SIPs a good way to gradually build wealth in a way that limits the volatility in returns. He also advises allocation toward fixed deposits, which he considers safer than direct equity investments despite lower returns.
According to Deepak Jasani, head of retail research, HDFC Securities Ltd. mutual funds, which may be a medium-risk and medium-return alternative to direct equities, are touted as the easiest ways to invest in the stock market.
Kamath thinks return-on-equity combined with the beneficial tax rates makes equity investments an attractive avenue to allocate capital at this juncture.
Kamath advises allocating up to 20% of your investment portfolio in bonds. “I would suggest tax-free bonds like NHAI and IRFC, which currently yield a
Apart from all this Jani suggests adding in a part of the portfolio toward buying commercial papers, an unsecured promissory note with a fixed maturity. He said, “The 1-5 year commercial papers look attractive as the Reserve Bank of India may follow up with more rate cuts,”.
Consider Building a Mixed Portfolio
A mixed portfolio stands for a combination of the three asset classes along with other instruments such as commodities, gold or gold ETFs, and real estate-based investments.
According to Kamath, a model portfolio that could include a 35% allocation to real estate, 35% to equity, 20% to fixed income, and 10% in gold, which could also act as a hedge on one’s overall portfolio.
Jani believes investments should be linked with the future goals in such a manner that the investor does not have to scrounge around for money when he needs it. He suggests adding mutual funds, fixed deposits, gold ETFs and government securities besides equities to one’s portfolio.
Best Practices You Should Follow to Invest During Coronavirus
According to experts maintaining a cash emergency reserve is important in uncertain times like these. Some suggested setting aside 18 months of living expenses as a contingency cash reserve and then investing from the surplus beyond this. Some other basic best practices include getting external help, self-learning, and experimenting.
Get a Financial Advisor
Dr. Mohit Batra, the founder of the independent equity research website Marketsmojo.com, said that the Indian stock market is very safe if investments have been done in a disciplined approach given the strict regulations. He, thus, recommends a good advisor to bring about the required discipline while investing.
“Plan your investment journey properly. Instead of chasing low brokerage fees, chase a proper advisor,” says Batra.
Modi thinks – “That is the single most important thing that could change the chances of your financial success and freedom. If you haven’t started yet, you must begin without any further ado.”