What should you do with your investment portfolio when the world is struck by Coronavirus

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19 MARCH, 2020

Yes, the world is in the grip of a COVID-19 panic and the basic instruction to keep the virus at bay is to wash your hands often. Do not touch your face. If you are an investor in the stock market, through mutual funds and stocks, you should follow the same advice - do not touch your investment portfolio.

Yes, this is hard advice to follow in terms of your investments. For those of you who have seen the last
meltdown in 2008, it might seem like the bad times are back. However, if you do a comparison with the previous meltdown of 2008-09, the markets fell by over 60%. This time around, the fall in equities hasn’t been very sharp, although the fall has been quick.

Here are five reasons why you should not touch your portfolio:

India has limited external trade exposure: India has been slow in joining the Asian supply chain network. This means we have a limited presence in China, and we are also not a major exporter to the world. This means the global impact may not hit us too hard.

The domestic inflow of money has not stopped: Yes, there has been a massive sell-off in equities but Indian investors continue to have faith in the economy. Monthly SIP inflows clock in at Rs. 8,300 crores. Add the EPF and PF inflows, and the number reaches Rs. 12,000 crores to Rs. 13,000 crores every month. The global impact may not affect India as much.

We have a strong consumption economy: India is a services and consumption economy. As long as there are people in this country, we will continue to use services and consume goods. India’s share of exports in the world economy is just 1.7%. As the world makes a shift toward telecommuting, India stands to benefit because global companies will look beyond China. We might not grow this year at the same speed as between 2004-2016 but India’s economy may not fall drastically. In fact, rating agency Moody’s cut India’s growth forecast from 5.4% this year to 5.3%. That’s a drop of just 10 basis points. Considering they cut China’s growth forecast by 40 basis points from 5.2% to 4.8%, we would say we are doing alright.

Turning adversity into advantage, India may gain: As the world realises that you should not put all your supply chain and manufacturing eggs in one basket (China), an obvious alternative is India. We can expect more global manufacturing to come to India. Another plus point for India is the massive drop in oil prices. This will reduce our external payments and save us foreign currency.

Lastly avoid any panic: The way the human psyche behaves during good times and bad is very different. When you started investing, you would have had a very clear investment horizon and financial goal. For example, you would have considered ten year horizon to buy your first home by investing in mutual funds. Now, as the world is panicking, you are suddenly thinking in weeks and days. Don’t do this. Volatility is part of the stock market. It is possible that the crisis may get worse before it gets better. A virus is not the end of the world. It will pass away in time. The stock market won’t. Your investment goal won’t. Stay put.

Invest now

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Reasons to stay invested during the Coronavirus outbreak

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