Moneycontrol
Get App
Last Updated : Mar 23, 2020 01:48 PM IST | Source: Moneycontrol.com

Coronavirus has killed risk appetite but good time to invest in quality stocks, say experts

"Valuations of high quality companies have become quite attractive. One needs to keep the faith and be a long-term bull in India," Nilesh Shah said.

Sunil Shankar Matkar


The coronavirus outbreak has all but killed the risk appetite, given the sharp fall in equity markets across the globe. India is not immune to the fall. The BSE Sensex has crashed more than 36 percent from its record high in two months.

"There is a collapse of risk appetite across the globe and no one knows how this is going to play out as the market moved in an exaggerated manner due to low liquidity," Hitendra Dave, Head of Global Banking and Markets, HSBC India, told CNBC-TV18.

"We have been seeing outflows from FPIs," he said.

Close

One of the big reasons for the market crash is the selloff by foreign institutional investors (FIIs) as coronavirus cases spiralled outside China.

Coronavirus LIVE updates

FIIs sold more than $8 billion worth of shares since February 24 and dumped $7-8 billion worth of government securities.

As a result, the Indian rupee breached the 76-mark against the US dollar intraday for the first time on March 23, trading 70 paise down at 75.89 at the time of writing this story. The Indian currency has weakened by five rupees in more than two months.

"The Indian rupee has been a bit more stable than equities and is posing least of the problems right now,” Dave said, adding the RBI would cut rates in April, if not earlier.

Given the sharp fall and the Sensex and the Nifty hitting lower circuits twice in March, the bears seem to be in control.

"We need to deal with this crisis with calm. Some measures by the US and in India could provide support to the market. US markets need to stabilise before India does," Nilesh Shah, Managing Director, Kotak Mahindra Asset Management, told CNBC-TV18.

"Investors should continue to hold on to their investments. We don’t know if it’ll take weeks, months or quarters before things recover, but clearly this is not the best of times to exit."

Most of experts feel this is the right time to accumulate stocks as valuations turn more attractive but one should be with quality names or fundamentally strong companies.

"Valuations of high-quality companies have become quite attractive. One needs to keep the faith and be a long-term bull in India," Shah said.

Gautam Duggad of Motilal Oswal Financial Services also said it was time to deploy cash in quality names for the long term. Some stocks were looking very attractive, though the bottom was unpredictable, Duggad said.

Vinay Pandit, Head-Institutional Equities, IndiaNivesh, too, said these were excellent times for long-term value picks at cheap valuations. "It's time to pick and choose but focus should only be on quality businesses and companies which have stood the test of time."

With earnings and economic growth expected to be hit, earnings would be difficult to predict, experts say.

Looking at future earnings and valuations would be, Duggad said.

"It's all about what kind of Nifty earnings hit one is expecting and what multiple are you ready to give these markets. In the current scenario, it looks like investors are not willing to give a multiple of more than 11-13x and presuming overall earnings for FY21E will be down by 20 percent across the board, in which case the bottom is somewhere between 6,800 and 8,000 for the Nifty," Pandit of IndiaNivesh said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

 

Moneycontrol Ready Reckoner
Now that payment deadlines have been relaxed due to COVID-19, the Moneycontrol Ready Reckoner will help keep your date with insurance premiums, tax-saving investments and EMIs, among others.

First Published on Mar 23, 2020 01:25 pm
Sections
Follow us on