Moneycontrol PRO
Upcoming Webinar:Prashant Shah explains ‘Irrelevance of Bull & Bear Markets for Success in Technical Analysis’. Register For Free!

How should you assess and reposition investments amid COVID-19?

If you cannot handle a sharp drop of 10-15 percent, lighten up. Remember investing is not a game of T20 cricket, where you need to hit every ball… markets will give you enough “full-toss” balls to hit.

May 30, 2021 / 09:32 PM IST
How should you assess and reposition investments amid COVID-19?

How should you assess and reposition investments amid COVID-19?


Money does not have emotion.

Why are India's market indices rising, "cold-heartedly" amidst a tragic, ferocious second wave? No one knows for sure - perhaps, it’s the optimism of a quick recovery once our vaccination program succeeds.

Perhaps also, it’s how this played out for the US and UK.

Great if this assumption comes true. What if it doesn’t?

Remember, India's consumers and businesses do not have the benefit of government grants amounting to trillions of US dollars.

Close

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

And there's no way to forecast how soon we will get this wave under control.

How should you assess and reposition your investments?

#1 Minimizing losses over maximizing gains

• If you cannot handle a sharp drop of 10-15 percent, lighten up. Remember, investing is not a game of T20 cricket, where you need to hit every ball… markets will give you enough “full-toss” balls to hit.

• Another way is to invest in leaders in their industry segments. Larger companies are wrestling market share and becoming stronger, more profitable.

#2 Go west young man. And east.

(a) Twin drivers of growth:

The US and China are today driving the world's growth. At a combined $35 trillion, their GDP is 43 percent of the world's GDP, and is expected to grow 6.50-8.50 percent in 2021

(b) Strength of the US consumer:

o Household incomes in the US have largely been protected by unprecedented government stimulus. As a result, Personal saving was highest-ever $4.12 trillion in 1Q 2021, compared with $1.20 trillion in 2019

o Current U.S. unemployment rate is 6.0 percent (March 2021), compared with 14.7 percent (April 2020 - highest since Great Depression)

o Personal consumption, the biggest part of the US economy, has surged an annualized 10.7 percent, the second-fastest since the 1960s

(c) US consumes, China produces

o China's average exports per month have grown to all-time high of $215 bn. Exports to US grew are back to pre-COVID levels (even higher), with significant recovery Aug 2020 onwards

o In 2020, China was only large economy to grow (2.3 percent)

o As per recent data, China saw a steady industrial production rebound (up 25 percent), retail sales increased 34.2 percent

(d) Investing in Growth, Margin of Safety

o Markets have rallied in US (NASDAQ up 58 percent, S&P 500 up 44 percent) and China (CSI 300 up 30 percent, Shanghai Comp up 20 percent)

o US markets at all-time highs; invest in a staggered manner

o China indices have recently corrected (between 8-18 percent) and offer higher margin of safety

#3 Opportunities exist in the worst of times

• Consider directing your India investments to ride growth from global demand (exporters) - IT services, engineering, and pharma are some sectors likely to benefit.

• IT services: research forecasts US$ 1 tr opportunities, translates into incremental USD175bn for Indian companies, in turn implying doubling of revenues from current USD150bn of exports.

• Consider adding new-gen companies now listing on our exchanges - technology, digital commerce, asset management, insurance, business services – are examples of such opportunities.

Not only does money have no emotion, it also has no color.

Stay safe. Happy investing!

(The author is Head, Investment Management, at Edelweiss Financial Services)

Disclaimer: The views and investment tips expressed by 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.
Anshu Kapoor is the Head of Edelweiss Private Wealth Management.
first published: May 30, 2021 08:28 am

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark