March 23, 2020 : The nervousness is palpable!

It is inevitable that the numbers of infected cases will be going up everywhere globally.

However, COVID 19 is not a hopeless case from the stock market point of view and I do see light at the end of the tunnel.

Please note that, I am revising my NIFTY nibbling levels from 8,000 to 7,000, though.

Here is my take on COVID 19 and what the Govt/Policy responses are and will be:

Every country all over the globe needs to buy time by suppressing Corona Infected Cases, by way of the strictest of Social distancing measures (complete lockdown).

There is no question that social distancing will show results, with a time lag of 15 days, as contagion factor reduces from 3.0 to 0.3.

However, the question is, will not Corono raise its head again, as the restrictions are lifted!

Is shutdown not just deferring the problem?

It is in this context, we need to draw on the experiences of the Asian countries:

Once the numbers are suppressed with the initial clampdown, it needs to be followed with a number of measures such as

(1) Extensive testing of all suspected cases and isolating them

(2) Ramping up ICU/Ventilator capacity

(3) Building social habits such as using sanitizer / masks / maintaining minimum physical distance

After the initial suppression by way of complete lockdown, the social distancing restrictions could be lifted step by step, so as not to increase the contagion factor beyond one.

In all likelihood, it will be possible to restore some level of normalcy in people’s life.

For instance, people may be permitted to go to office, while keeping the malls closed.

What is the impact on Economy?

It is clear that till the vaccine is found, or the virous goes away due to summer or some other factors, there will be extended period of months, that the economic activity will be limited.

What is our take on Market

While the market valuations are compelling, and discounts the fact that one year will be a complete washout, it can still go down further, in view of the increasing scare arising out of rising Corona Infected cases all over the globe.

In terms of strategy we will continue holding existing equity positions.

However, we will make fresh purchases at NIFTY 7,000 levels or below only.