Markets – What should we do!

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After 11 years of bull run, there may be some more pain left in the USA markets, despite 33% fall from the recent peaks.

However, I feel that India may be closer to the bottom with NIFTY around 7500 to 7800 levels. Were this to happen this will be 37% fall from the recent peak.

Indian markets are trading at extremely attractive levels. Unlike USA, we never saw a bull run in recent years. Some of the ratios like (Price to Book ratio at 2 & market cap to GDP ratio at 0.5) are close to the the levels seen post Lehman crisis in 2008.

At the same time, the impact of Corona on India will not be as drastic as others, as we are not as globally integrated. The drop in oil prices is a windfall too.

The developing story is what is happening on the Corona front.

The numbers in the four worst hit European countries (Italy, Spain, France & Germany) has climbed from around 20,000 levels to 100,000 in a short span of one week. USA too would accelerate in the coming days from 20 k levels now and in my estimate, may peak around 75 to 100 k.

While these numbers are already discounted by the market, the pace of increase is scaring the market.

However, I am very hopeful that with complete shutdown, Europe and USA, too will contain Corona, as was done in China and Korea.

My take is that the pace of increase of infected cases will slow down in Europe in the coming week, If this happens then the markets will bounce sharply. USA numbers may increase for some more time though.

In this context, it will be interesting to watch what happens in Europe over this weekend.

India can be the wild card too, even though the official numbers look well in control here. People say, this may be due to inadequate testing. In view of the fact that we have already imposed closure of major cities which should prevent the spread, I don’t see India spiraling out of control as the central case. All bets are off, were this to happen.

As a strategy, I will continue to nibble on every sell off to 8,000 levels, subject to the above observation on Corona numbers.

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