History suggests that such steep correction is often a buying opportunity in equities. In terms of valuation as well, owing to recent correction, valuations are in a reasonable zone as well.
Similar to global markets, Indian equities, too, have borne the brunt of the coronavirus spread that has imperilled world economy.
The deadly virus has now spread to over 30 countries, with over 100,000 confirmed cases.
The fear that the situation may worsen is making market participants cautious, due to which, equities around the globe have taken a hit.
The S&P BSE Sensex and Nifty50 have plunged more than 10 percent, respectively, from their record highs registered in January and are down over 7 percent since February.
The carnage was not limited to frontliners, but broader markets too fell victim to the deadly outbreak.
At a time when most of the global firms have reduced their global growth forecast, G20 finance ministers and central bank governors last week pledged to take “appropriate” fiscal and monetary measures in responding to the coronavirus outbreak and to protect economic growth against shocks, Reuters reported.
Coronavirus has turned to "worry" from "concern" but at the same time, it has made valuations attractive for long term investors, suggests experts.
“In the present scenario, while the PER valuations of Nifty have corrected to a more reasonable level of 18x which is also the 10-year average, it is still not in the attractive zone. So, the recovery after the correction from the coronavirus impact could also be slow and gradual, in line with the economic recovery,” Sonam Udasi, Senior Fund Manager, Tata Mutual Fund told Moneycontrol.
“Even from a global context, ample easy liquidity has supported equity valuations at higher levels over the last 10 years, which is very different from the 2002-03 scenario where valuations were cheap after the correction post the tech bubble,” he said.
Anecdotal evidence suggests that equity as an asset class has significantly outperformed other asset classes over medium to long time horizon, but considering the fact that Gold has hit a record high, many investors would be tempted to increase their allocation. Investors should not allocate more than 10 percent of their portfolio to the precious metal.
“From an asset allocation perspective, it always helps to invest in the uncorrelated asset class and hence works as a good hedge/protection in one’s portfolio. One could consider holding a 5-10 percent allocation in gold as an asset class from a diversification point of view,” Devang Kakkad – Head, Research & Advisory – Equirus Wealth told Moneycontrol.
History suggests that such steep correction is often a buying opportunity in equities. In terms of valuation as well, owing to recent correction, they are in a reasonable zone.
“Ongoing uncertainty and fear reminds one of Sir John Templeton’s quote - ‘The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell,” added Kakkad.
“Current challenges are surely concerning but not unsurmountable, such times provide the best investment opportunity. For long term investors, there is certainly a bargain available to invest and create wealth,” he said.
Here is a handpicked list of stocks by different brokerages from large and midcap space:
Kotak Securities
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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