Investing in the times of Corona Virus scare

Friends –I am as equipped as you are, in predicting what will happen to the corona virus spread. Given whatever information we all have, I would like to share my thoughts:

• Here is one very good analysis of what is happening to the spread of virus and what can happen in the coming weeks – https://medium.com/@tomaspueyo/coronavirus-act-today-or-people-will-die-f4d3d9cd99ca.
• Right now, the sensex is going down because the FII’s are exiting. In Feb, the FII’s exited to the tune of Rs.12684 crores and DII’s bought for Rs. 16933 crores. Till today (12^th March), FII’s have exited worth Rs. 20831 crores and DII’s have bought for Rs. 17903 crores ( Source: Moneycontrol.com).
• As of now, US has around 1300 confirmed cases and India has around 60 confirmed cases (as of 12/3/2020). There is a sense of panic in the US resulting in FII’s exiting world markets (including India and the US).
• Having said that, all data tells me that India will also have increasing number of confirmations in the days ahead. In about a week or ten days from now, there could be a sense of panic in India as well, with the number of confirmed cases here too crossing 1000.
• This would mean that DII’s also will start exiting the Indian markets in about 10 days. That would bring the sensex to a much lower level than the current levels of 32750.
• So, if you are invested in equity directly or through equity MF’s – get ready for a further significant fall in the Sensex – I won’t be surprised if the Sensex goes down to near 20,000 levels. Be mentally prepared to see your portfolio go to half it’s value.
• This scare will get under control when the number of new cases start coming down. The scare is already down in China and the other countries (including India) will see this situation by about May mid.
• The markets will then see a revival.
• I do not expect any returns this year – the economic impact of this virus would take a few more quarters to stabilise. The corporate earnings for the next 2-3 qtrs will not be encouraging.
• As investors, we are optimists and we believe that the future is better than the past – there is no reason to doubt that belief.
• In the coming days, there will be this urge to sell everything and get into cash – try to control that urge and stay invested in good companies. Just ensure that you do not act in panic.
• This can be a good time to clean up your bad stocks and get some liquidity in hand.
• If you have liquidity, do not buy stocks in a hurry. There will be better opportunities in the weeks ahead.
• If you want a safer option – please look at Gold ETF. Gold is likely to gain in these times of panic. But you will need to sell it when the situation stabilizes.
• If you have money in debt funds – make sure that you are in ultra- low duration funds or in liquid funds.
• When the markets start turning around – then you can buy more of the good companies. Not now.