The markets posted biggest fall ever, today and ended 2919 points down. With sentiments taking hit where it hurts the most, investors are left to panic.

Mr. I V Subramaniam, Director, Quantum AMC shares his thoughts.

The Sensex declined by 8.2% today and by 20.5% YTD. The decline in share prices has resulted in trailing twelve-month PE ratios declining from the peak of ~28x to ~20x currently. MTD FII have sold to the extent of $ 3.1 Bn and the local mutual fund buying of $524 Mn, could be no match for it

The inflated equity prices without earnings growth were at risk anyways and the Coronavirus plus the announcement of the takeover of Yes bank was probably the last straw that broke the camel’s back.

While one has to be careful from getting infected by the virus, the panic in the market could also be an opportunity. We are using the opportunity to reshuffle the portfolio towards companies that can sustain the slowdown in the economy and a changed macroeconomic scenario where rupee could slip and inflation could be higher. In cautious markets, we see opportunities and are deploying cash. The silver lining is that the 10% higher than normal rainfall last monsoon looks to have resulted in a record winter harvest. This could act as a cushion to the fall in economic growth.

The normal operations of research in companies continue. Precautionary measures taken by companies in India to prevent the spread of COVID 19, will impact our ability to go and physically meet companies or visit factories, but through con calls we are able to reach out to companies, speak with them and assess the risk they are facing or the opportunities that are coming their way.
We have allowed our staff to work from home or to visit our satellite office in the suburbs rather than traveling to our main office by undertaking a journey in the crowded trains or the crowded streets.
Our advice to investors is to stay invested and allow the fund manager to change the portfolio to meet the new realities. The world has indeed changed.

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