Investors cannot forget the 2001 and 2008 global financial crisis and stock market crash. At present, the COVID-19 pandemic has caused a consistent decline of a double-digit in the equity markets.
In India, the lockdown has affected 53% of businesses significantly, the supply chains are stressed, and farmers growing perishables are experiencing uncertainty. Indian stock market has posted their most horrible loses on 23rd March 2020. Nonetheless, on 25th March a complete lockdown of 21 days was announced by Shri Narendra Modi, Nifty and Sensex posted their colossal gains after 11 years. It added 4.7 lakh crore or $66 billion to the investor’s wealth.
Intraday traders are making some money but long-term investors are concerned about their portfolio’s low-valued stocks. Should they ease their portfolio of the low-value shares or buy more reasonably priced quality stocks? Should they wait for the valuation of good blue-chip companies to go low?
Predictive changes in Indian stock market
The fact is that there is no scientific way of predicting the turning point in stock market with respect to the changes currently experienced due to COVID-19. Nevertheless, the stock market currently is not high priced as it was 4 to 5 months ago. On the basis of previous global recessions or pandemic situation, it is predicted that you will see reasonable long-term investment.
Coronavirus vaccine is predicted to get developed in a couple of years. Therefore the prediction associated with post coronavirus pandemic indicates investors to plan a long-term goal because Indian government is taking beneficial steps for protecting the micro, small & medium enterprises. Companies have already started their operations with 33% workforce.
What do investors need to remember?
- Long-term investors can buy high-valued stocks currently at low prices but will need to consider some criteria like –
- The stock needs to be at 0-debt.
- Have a high-profit margin.
- The company has to be capable of experiencing the bottom and giving a big swell.
- The stock has to be strong in this current situation.
- Prefer sector leaders with solid balance sheets, strong cash flow, high earning visibility, and management with an optimistic track record.
- In India, the economy from supply and demand will get affected. This can slow GDP growth. RBI policy for rate cuts and CP inflation will affect the financial and banking sector very badly, so stay away from banking stocks, at the moment.
- You can make long term investments in healthcare and Pharma. Their shares will be profitable after the COVID-19 situation turns to normalcy. The government will also give a boost to the healthcare sector shortly.
- Sell stocks that are unproductive in your portfolio as soon as you can.
- Even sell stocks with low-profit margin.
The COVID-19 pandemic has made quality stocks available to investors at attractive valuations. Therefore, long-term investors must apply a new asset allocation tactic to reinstate their original asset assortment.