With Covid-19 pandemic looming around the globe, this has raised questions on human capabilities to handle epidemics. This has caused panic amongst the investors leading to a fall of more than 30 per cent in major indices in a very short span of time. Not only equity but debt market has also taken a beating due to surge in the outflow from FIIs.
Am I worried?
Off course with the global shutdown and net worth going for a toss, this has lead me to the question about the sustainability of capital markets. Which further leads to a few questions
Is this the end of the world?
I don’t think so, mankind has faced some big crisis like Spanish flu pandemic which killed 5 per cent of the world population in 1918, Bubonic Plague which almost killed 50 per cent of the global population. Still, the resilience shown by mankind has defeated all this. so later or sooner this will end and we will get back to our normal lives.
Is the market fall over?
I don’t know and infect nobody knows this. No one has seen this type of crisis in the modern era so it’s almost foolish to compare this to 2008 financial crisis or with IT bust, the bottom of the market is made when there is nothing left for optimistic people, but still I can see some optimism at lower levels so some brutal falls can definitely hit markets.
Shall I invest now?
If you have some cash in your account then you can definitely start increasing equity allocation, but you should be ready to see big falls in your portfolio in the near term. Investing in phases help you from fear of losing out and the part of cash left can help you enter markets later on when the market falls more.
At this point in time, when cases are increasing at a brisk pace, it’s better to protect ourselves and our portfolio rather than predicting and exposing ourselves at one go.
In the next article, I will be talking about the valuation of markets