The correction after Coronavirus pandemic in the markets has allowed us to deploy our cash allocation giving us an opportunity to buy quality stocks at attractive valuations.
For long-term observers of equity markets, the wild gyrations in the last week was a once-in-a-decade event. The last time we witnessed such deep, globally synchronised sell offs was in 2008, when the global financial system essentially froze after large financial institutions in the western world, including Lehman brothers, went insolvent due to the subprime crisis in the USA.
The major difference between the correction in 2008 and 2020 is that in 2008 it came on the back of very strong earnings growth and essentially took market participants by surprise. The correction in 2020, especially in India, was not totally unexpected. The markets have been rising devoid of any earnings growth. What has surprised many, however, is the pace of fall. Most indices have lost around 20% from their respective peaks, in just over a month.
You might also be interested to read: Good News For Women In Navy: SC Grants Permission For Permanent Commission
The Covid-19 impact
As governments race around the world to stop the spread of the novel coronavirus, we are seeing an increasing trend to impose restrictions on public gatherings as well as shutting malls, movie theatres, sporting events, and so on. One expects companies’ dependent on discretionary spend to be the first to get impacted. How long this will last is anyone’s guess, but given that the countries who were the early epicentres of the new virus are reporting lower cases, one expects the economic impact to be limited and transitory.
Source: Economic Times
