I was immediately thinking of publishing what is on my Buy List. But that will be the epilogue of this blog.
It is 09 Mar 2020. The Sensex closed at 35634 level. After touching 35109. About 6% down in a day. The Dow also danced, so did the Nikkei and the FTSE. My wife has just poured a cup of hot “chai”, I differentiate between tea, the concoction which British gave, and the “chai” which I drink. They are as different as London from Leimakhong. I still prefer my milky, syrupy, ginger laced boiled in a pan cup of the brew, not withstanding the Earl Greys and Green Teas. And I am checking out my messages from my readers. What next? The markets today have tanked by 1942 points on the sensex. There was a movie 1942– A Love Story. This seems like a Horror Story. A good correction which was over due. Proving again that markets can remain far too long irrational than you and me can remain rational.
The start of this panic was in China due to the the Corona Virus, now called Covid19. We have read and watched enough on it. The most prescient warning came about 10 days ago from Raghuram Rajan, ex Governor RBI, when he said, “India should look into containing the virus and not worry about stimulus.” That was an alarm bell to me. Knowing India and more so Indians, even I was worried when the Govt only started screening passenger flights from China, I had discussed with my wife and told her that this is just a decorative gesture. Indians stuck in China will get out from any available route and we as a very smug society, never follow rules or understand the gravity of crisis situations. And lo behold, Indians, took South East Asian and Japanese routes, when the Govt blocked them, they used Dubai and Europe. Suffice it to say, the virus carriers were already in India in huge numbers before we actually started screening all flights. The appropriate long term action should have been to screen every incoming sea and air passenger for this virus even at the cost of discomfort to passengers and a cost to the Govt. The National Disaster Management Authority(NDMA) should have been activated. But I am not discussing the virus and its containment.
Knowing Indian hygiene and sanitation conditions and our habits, We shall have a sizable number of casualties. Our systems are incapable of handling vast numbers of our infected population. We believe in “Bhagwaan ki Marzi” and will give that answer to this Black Swan event, if and when people die in large numbers. I just hope and pray, that actually God rescues India again as He has always.
Let us look at what will happen to investments. The double whammy of Yes Bank in ICU and the Covid, is playing out in two or three ways. The people do not know where to keep their investments, Private Banks— Dunno. Public Sector Banks — Dunno. Real Estate — Dunno, ever since NDA came, the sector is going through loose motions. Bonds– Dunno. Rs 10800 Cr worth of AT-1 bonds issued by Yes Bank and held by Banks and Mutual Funds have become zero. As a result, all other asset classes are f*&#@d. Only Gold and silver are shooting through the roof. To the poor, that’s the only safety. And for rich governments also, that is the only safety.
It has started with air travel reducing, airlines going empty, consumption of fuel being reduced, crude crashing , people not travelling, so no consumption at airports, travel and tourism hit, suppliers of raw material and importers of raw material affected. Consumption in China affected, so will be consumption in India. If the two biggest consumers, stop consuming, shit is going to hit the roof for entire global economy as well as domestic economies. So asset classes will correct. It may be too early to say, but it looks like the Black Swan of the 2010-2020 decade, after the 2007-08 sub prime event. My portfolio has corrected by 13% in the last few days. At 35600 or so we are overall 14% off the January peak of 42737. It wasn’t too far. Just 25 trading days earlier……..I think a fair value of sensex is about 32000 or there about. That’s another 10% away. And there the carnage could level out. But I am putting my mouth where my money should (twisted the idiom) . It implies a more than 25% correction in Indices. That’s about a bear market. How long it remains will be seen, if we reach there.
Now comes the million dollar question, what should we do?
- Sit Tight on invested corpus. Don’t panic and sell.
- Keep your SIPs going. Don’t stop them.
- If you are sitting on cash, like one of my readers, Anshul Gaur has been. He has been asking me for last two years about the correction. And was fast running out of patience, his prayers have been answered. Now is the time to start buying. Invest 10-15% of your corpus, at every 3% dip. Implying if you have 10 Lakhs with you, invest 1.5 lakh today and then on every 2 to 3% market dips keep investing.
- Do not switch to FDs or Bonds or debt now. This is the time to make your portfolio and go for the kill.
My buy list which was ready since January:
- ITC. Where do you get ITC at a 14 PE multiple and a 4% dividend yield.
- HDFC Quartet — HDFC Bank, HDFC, HDFC AMC & HDFC Life.
- Cadilla Healthcare
- Godrej Consumer Products
- Godrej Agrovet
- Divi’s Lab
- Vinati Organics
- IDFC First Bank ( this is a 10 year story)
- VST
- Dr Lal Path Lab
- CDSL
- Indian Energy Exchange
- Relaxo
- SBI Life
- ICICI Lombard General Insurance
- Paint Triplets– Asian, Berger & Nerolac (with crude crashing, they benefit)
- Gilette
- Titan
So happy hunting. Keep buying. And do not worry. What goes down, does come up. Learn from the pe#is 🙂 Happy Holi