Economic And Social Impact of Pandemic: Investment Strategies
During a tough time, it becomes more vital to take a cautious approach while investing in equity and equity-related products
By R.K. Mohapatra •
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Uncertain outcomes of the COVID-19 pandemic have halted economic activities around the world. The social and economic implications of this epidemic have to be understood by the people, as well as the government. The imposition of nationwide lockdown is only a precautionary measure to prevent the spread of COVID-19, but it is not a solution at all to eradicate a novel coronavirus.
Credit rating agencies and the World Bank have downgraded India's growth projection for the fiscal year 2021. Some experts also forecasted negative growth of India and expected that India would need a large stimulus package (about $10 trillion) to overcome the contractions. The dream of a $5 trillion economy in India may fade away as the impact of slower growth of the gross domestic product, as well as revenue, persists in the forthcoming years.
The impact of lockdown all over India has brought down the real estate and infrastructure sector once again, develop a massive liquidity crisis. On the other hand, the lockdown of plants and factories has a cascading impact on the economy, which could create a vicious circle of lower corporate capex, weaker consumer demand, and an unprecedented level of unemployment in the country. There is a possibility that the coronavirus pandemic will lead to an impending global recession.
The Sensex and Nifty are down more than 25 per cent from its peak. There is no visibility on the earnings of the corporate in the current financial year due to nationwide lockdown. Nobody makes predictions of share prices based on the fundamental of the company and also price-earnings multiple of the market. The capital market may test another 10 to 15 per cent further down shortly due to the uncertainty of the vaccine of novel coronavirus and other global turmoil as well as underlying economic factors.
An investor should think about all the possibilities within an open mind. Research shows that in the past 20 years, the world faced several outbreaks of unknown diseases that have caused panic, quarantine, and fatalities. The lesson that we should learn from all of these is that they are never easily solved, which takes a year to reach the end stage of an outbreak. Investors continue to weigh a brutal economic picture against hopes for a coronavirus treatment and an ultimate end to lockdown measures across the world.
If the current situation persists for long periods that may drastically reduce the worth of assets, as well as the price of all commodities, because of low demand.
Investors are going through a very troubling and volatile period. During a tough time, it becomes more vital to take a cautious approach while investing in equity and equity-related products. Investors should follow the principle of asset allocation while investing and build a balanced portfolio based on current market conditions, which benefits them in the long-run.
The concept of "buy low, sell high" should not forget, while the market has uncertainty and massive correction. In fact, opportunities are always in the equity markets, and investors have to judge it and make a meaningful and sensible right decision to buy a value stock at the right price and at the right time.
Significant investments in shares and mutual funds through the systematic investment plan/systematic transfer plan would be a great strategy in the uncertainty and volatile market. It is prudent for investor's to accumulate value shares from chemical, FMCG, and pharmaceutical sectors, and should also consider a mutual fund based on size, past track records of the fund house, pros and cons of risk, and returns of a fund scheme while selecting and achieve their goals in the long run.
