Two days after the Indian stock markets hit the circuit breaker and halted trading, the benchmark indices have ended extended for the second straight day on Wednesday. The BSE Sensex zoomed 1,861.75 points to end at 28,535.78, while Nifty surged 516.80 points to 8,317.85 on hopes that the Centre might soon unveil a fiscal stimulus package to tide over the 21-day nationwide lockdown announced by Prime Minister Narendra Modi.
On Tuesday, extending global stock markets trend, BSE 30-share index Sensex and NSE 50-share barometer Nifty closed higher. The two last two days have been a breather for traders after Indian stock markets recorded the worst day in its history on Monday, when the stock markets almost wiped off the entire Modi era gains of more than five years.
With cheaper stocks and the two-day gains in the stock market, is it the right time to invest in the Indian stock market?
As Forbes’ personal finance writer David Rae puts it, “the answer will likely depend on when you will need the money, and how you plan to use the money.” The more time you have invested in the stock market, the better your chances of building life-changing wealth.
The stock prices have crashed and hence, are much cheaper. At the same time, Indian stock markets are still highly volatile.
Hence, it would not be wise to rush into a buying spree at the moment. Even as most investors opine that this would be an ideal time to hit the buy button, there is also a word of caution—allow the markets to prove it is one the path of recovery for at least four to five straight sessions.
Wait and watch. And if you are confident and trust the companies you intend to invest in the long term, then there is no better time to buy the stocks. “From an investors’ point of view who are sitting on cash, this is a great time to put money at work. Probably don’t go out and put all your money at one go but you can just spread it out over the next six to 12 weeks. One of the cardinal principles of investing is you have to buy when there is blood on the Street and that is the time when you get valuations which are extremely attractive. Today you can buy large-cap companies at single digit earnings multiple,” the Economic Times quotes Renaissance Investment Managers founder Pankaj Murarka as saying.
Most of those companies’ shares can now be purchased on sale. As stock prices decline, the odds of you having above-average returns in the long term increases substantially.
Historically, investors have made most of their money by investing during a bear market. It is to be noted that the last financial crisis was in 2009, and we experienced one of the longest bull markets in history till COVID-19 came to play spoilsport. “We saw back in 2009, that the stock markets started a long march upwards, well before the long standing effects of the financial crisis had ended,” notes Rae.
The stock markets recover in the long run. Rest assured that there will not be heavy losses since what coronavirus brought in was a much-needed correction in the Indian stock markets.
Amid the market bloodbath, Morgan Stanley on Wednesday slashed earnings forecast for a third time leading to a cut in the Sensex target from 36,000 earlier to 32,000 in the base case scenario for 2020.
Despite the muted outlook, Morgan Stanley believes that investors with a 12-month view should put money to work in the equities. It is time to buy quality businesses where share prices have undergone a massive correction and thus valuations have become attractive. Morgan Stanley highlights 20 stocks in the focus list which include names like Bharti Airtel, Baja Auto, Maruti Suzuki, Motherson Sumi, Titan Company, Godrej Consumer and ITC, among others.
As Warren Buffet puts it, “Be fearful when others are greedy and greedy when others are fearful.”