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Dear Investor,
Covid-19, oil trade war, volatility...where do we go from here? This, or versions of this, is what most people are wondering and worrying about. We cannot influence the economic impact of the coronavirus outbreak nor manage the market's reaction to it. We do, however, want to keep you well-informed about what is happening in the economy, the markets, and what it means for your investments. Permit me to offer a few answers and a look at the road ahead.
 
Yes, we are in the midst of an unprecedented global crisis. Yes, the capital markets are reacting very adversely to it; stock market indices around the world, including India, are down by nearly 35%. And yes, we have not seen a financial crisis of this magnitude and speed since 2008. How to deal with it?
 
Before we get into understanding the reasons for this and ways to deal with it, we wish to emphasise the need for you to ensure you have sufficient liquidity to meet expenses for the next three months. Nothing is more important. Nothing. But, and this is crucial when trying to create liquidity to manage expenses. Do keep in mind that panicking and withdrawing money from equity investments doesn't make sense at the current levels. The only reason you should consider it, if at all, is if you have an acute need for cash and no other sources to provide for it.
 
On the other hand, if you already have sufficient funds in the bank, we advise you to stay invested and focus on the second half of the year 2020. Recovery will come once the crisis has blown over. This the need of the hour is to stay healthy, stay calm, stay safe, and strictly avoid looking at the market every day. Be assured, solutions to this medical and financial crises are on their way. Once that happens, which I believe will be sooner rather than later, the markets will rebound handsomely.
 

Currently, though, things look grim. Demand for goods and services across the globe and virtually in every industry is going to hit hard.  Airlines, leisure goods, and restaurants will be the first ones to see the adverse impact. Then, in time, all businesses will experience this drop in demand during and even after the pandemic has been vanquished.
 
While governments and leaders are trying to help businesses tackle this, the financial markets believe more, much more, needs to be done. Thankfully, I think all governments will recognise this, and that central banks will aggressively roll out fiscal measures to kick-start the recovery. Six months down the line, it won't be Covid-19 making the headlines. I am positive that the markets, having already considered the worst-case scenario, will rise faster than it seems likely now. Markets in the USA and China will fuel this recovery; yes, the ones worst hit by Covid-19. They are dragging markets around the world down. They will also be the ones that will fuel the recovery. A historical perspective of a bear market suggests that when markets have fallen over 30%, the average duration of the bear phase is estimated to be about 250 days.
 
Speaking of Indian markets, after this fall, they look extremely attractive and may well be among the best buys anywhere in the world. I believe they will be viewed as great opportunities. True, Indian markets may fall even further. But that only means even more attractive valuations and investment opportunities. Consider this, at the current PE of 19.72 times and price to book of 2.82 times, and we are at 2013 levels. As a consequence, we believe yields from equity are going to be superior to any other asset class, especially once the stimulus packages come into play.
 
We continue to work on analyse events and help guide you to the best possible investment outcomes.
 
On behalf of everyone at Gaining Ground, I want to thank you for being a valued client. I wish you and your loved ones continuing good health in the coming months.

Yours Sincerely
Ravi Kumar

Copyright © 2020 Gaining Ground Investment Services Pvt Ltd, All rights reserved.


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