NEW DELHI: Equity investors have taken a big hit in the recent selloff on Dalal Street due to concerns over the coronavirus pandemic. The bloodbath has forced investors to think about their equity investment and now they are wondering whether to shift to fixed deposits or change investment strategy. Some fear they might never be able to recover their money again.
Kailash Kulkarni, Chief Executive Officer at L&T Mutual Fund tried to clear this dilemma in his recent letter to investors. He wrote that the present situation is worrisome and has only multiplied with the coronavirus pandemic now looming on every country around the globe.
In India too, BSE Sensex and NSE Nifty have tumbled nearly 30 per cent till date from their respective all-time highs hit in January.
“As governments and world organisations are taking measures to handle this outbreak, the battle seems to be long drawn at this point. Obviously as an investor I am worried,” said Kulkarni.
He added that the economy has slowed down and with this pandemic, businesses across industries irrespective of their size are seeing some impact and will continue to do so for some time to come.
Despite the Reserve Bank of India’s (RBI) massive actions to spur the economy, India’s gross domestic product (GDP) is likely to contract by 4.5 per cent in April-June 2020 quarter and will rise by only 2 per cent in 2020-21, according to ICRA.
However, Kulkarni said, “Once things settle down, which we hope happens sooner than later, we are confident that the government will come out with some measures for the industry and people with some kind of a stimulus; the recovery will happen, it’s only a matter of time.”
Kulkarni has answered three key questions of investors:
1) Can I predict what is going to happen and will it be permanent in nature? Kularkni said no one can predict how long it is going to take for the coronavirus to get under control and life to get back to normal. “But historically we have always seen after a calamity, war or incidents with such global impact, people and economies have bounced back. No country and no community have remained stagnant and it is in human nature to overcome difficulties, innovate and progress,” he wrote.
2) Should I change my investment strategy? Kularkni said most of his investments in the market whether done directly or through mutual funds are long term in nature. He made all his investments with a certain goal in mind. “With such credible corporations trading at such low valuations, it is a good time to invest some more in equities. I will definitely not stop my SIPs as I know they will be buying units at very low prices, which will boost my returns when the market turns northwards,” he said.
3) Should I be worried about my investments and shift to FDs? The CEO of L&T Mutual Fund has his asset allocation in debt funds, bank FDs and provident funds etc. He also has contingency funds available in his accounts.
“Why should I be driven by fear and not see this as an opportunity? My point is let me be dispassionate, as hard as it sounds, and be driven by IQ rather than emotional intelligence. The textbook “basics of investing” is to have a financial goal and an asset allocation as per my risk appetite. And this is the time to stick to the basics and have my asset allocation in place,” he said while adding that everyone is as worried as the other person, but panicking and pulling out everything into cash may not be the wisdom that one has to show in these trying times.
Redeeming funds only ensures you convert a notional loss into an actual one. Kulkarni said that it’s at such a time that an advisor’s role also becomes critical.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
