Markets are down by more than 25% since the high recorded in January this year. Malls, cinema halls are shut. Work from home which was a preference of few organizations and privilege of few employees is being instituted widely across. Roads are empty with self-imposed quarantine and, in general, concern about how the Covid-19 spread may progress.

My Whatsapp is flooding with messages with skepticism, hope, worry, fear and confusion. I have learnt new terms like social distancing and flattening the curve. Newspapers in their zeal so that they can claim – “you read it here first” – are resorting to sensationalism and publishing half-cooked stories with almost no regard on the sensitivity of the matter. How about some self-restraint and responsibility in journalism?

Statisticians, forecasters, analysts and market pundits are working overtime to predict what will happen. Some say there will be a V-shaped recovery, and some are betting on a prolonged recovery. Slicing and dicing of historical data, Trailing PE/PB, Forward PE/PB, Market cap to GDP, multi-year returns after market crashes etc. is being presented to support various claims. What to believe in and how do I derive actionable intelligence?

People who are in the late 30s and above remember well, the carnage of 2008. Most of them including myself experienced it in our portfolios and learnt what happened when the markets recovered. Does this mean we should just start trading indiscriminately and we will make money? Many brokers are reporting an increased number of new accounts opening and trading activity. I am being asked by clients “Should they exit completely and reinvest later?”, “How long will this last?”, “Should they increase the investment now or defer to later?”. Here is my message to all the clients and the investors on what may be done.

1. The disruption and volatility in the markets are linked to how long the uncertainty will continue with the Corona virus spread. No one can say definitively but my guess is that the volatility will continue for 6 months or more.
2. Market valuations were stretched before the crash in the last two months. Mitraz team had been recommending investments in equity mutual funds over a long duration through STP. The valuation metrics are indicating very attractive valuation now however a word of caution. There will be an impact on the earnings of the company due to the adverse effect of social distancing and quarantines on economic activity. We are still recommending investments in equity mutual funds through STP but over a shorter duration of 6 months.
3. Many stocks have fallen to their 3-year, 2-year lows. However, as always, investments should be done based on the fundamentals. Mitraz approach of strictly following the cut-off and allocations have worked out well in the past. We have exited a few stocks which we believe may be impacted more and are selecting new ones that may do well given the current situation.
4. Don’t increase the number of mutual funds and stocks in your portfolio because everything looks so attractive. Principles of diversification continue to apply, and over-diversification will not help no matter how low the valuation of the market is.
5. Continue to follow rules of risk management, asset allocation and liquidity management. Don’t invest the money required in the short-term just because the market has crashed. Similarly, if you have cash available in the form of Savings Bank, Fixed Deposits that you can invest for 3 years or more, now may be a good time to increase the allocation to Equity markets.
6. In times of volatility, the handholding and the attention by an Adviser provide both the emotional comfort and the process to take timely actions. That’s why #AdviserZarooriHai.

Mitraz research team has been closely tracking the market and restructuring the investments to maximize the risk-return reward. We have also instituted some central monitoring controls and executions for more efficiency and better outcomes. Please contact your Adviser if you have specific questions regarding the steps being taken on your portfolio.

Lastly, I urge you to be careful of all the information that you are receiving on social media and verify as much as possible before propagating. I have put some mobile detox time every day to get away from some of the cynicism, negativity and pessimism. I am exercising caution for Covid-19 but have not stopped social interaction completely. Most of the Mitraz team is working from home while ensuring minimum disruption. A trite remark “This too shall pass” but still very relevant knowing how humanity has evolved till now. Please take precautions and stay safe.

The writer is the Managing Director of Mitraz Financial Services Pvt. Ltd and can be contacted at micontact@mitraz.financial