‘Stagger investment as valuations are attractive’

Mumbai | Updated on March 12, 2020

Panic selling has pulled markets down to one of its historic low levels. The fast spread of coronavirus has rattled both business and investors confidence. BusinessLine spoke to G Pradeepkumar, CEO, Union Mutual Fund, to understand what lies ahead for investors. Excerpt:

What should investors do after such sharp fall in market?

Markets have been falling for variety of reasons with scare of coronavirus spreading across the world being the prime factor. It is largely a panic reaction. Investors should stick to their plan and continue investing in a staggered manner as valuations are very attractive. Roughly markets have fallen by 25 per cent and this does not mean our economy will fall by 25 per cent.

The fundamentals of our economy are still strong but, of course, there will be a short-term pain due to fall in exports. Investors should continue with their systematic investment plans and consider weekly STP (systematic transfer plan) to take advantage of sharp fall in indices. Markets have bounced back after every fall as we saw in the years 2001, 2008 or 2013. The fact is good company stocks are available at an attractive valuations.

Which are the sectors do you think will bounce back faster?

Banking is considered the backbone of economy. If the economy bounces back, banking sector should definitely reap the benefit. Incidentally most of the banking stocks have been beaten down providing a good opportunity for investors. With interest rates being lower, NBFCs should also do well when the economy rebounds. Infrastructure sector may also be a good bet with huge spending being planned by the Centre. Having said that, almost top quality stocks of each sector are available at deep discount providing a great investment opportunity for investors.

Will a cut in key banking rate help revive economy?

It will be more of a sentiment booster. As it is, central banks in the US and UK have very little room to cut rates as interest rates in these countries are as low as 0.25 per cent and 0.5 per cent. The government and central banks have different tools to provide stimulus to the economy. Each country is using it to their advantage but how far it will help needs to be seen.

Do you think markets have bottomed out?

It is very difficult to predict the bottom in a market which is moving without any rational. Markets are like a pendulum; it swings both ways. It may or may not fall further by 5-10 per cent but the fact remains when the economy bounces back investors will not get to invest at these low levels.

Published on March 12, 2020

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