Uncertainty creates volatility, here’s what investors could do to dodge the crisis | Interview

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May 5, 2020 9:50 AM

As uncertainty looms large, volatility again jumped 28% on Monday as equity markets resumed trading after a long weekend.

As uncertainty looms large, volatility again jumped 28% on Monday as equity markets resumed trading after a long weekend. Investors are often puzzled over how to invest in such a volatile environment. While there is no foolproof way but a rather safer way could be stinking to defensive sectors or starting a SIP in Large-cap funds or Multi-cap funds, said Prakarsh Gagdani, CEO, 5paisa.com. In an interview with Kshitij Bhargava of Financial Express Online, Gagdani sheds light on some ideas that investors can further explore while investing in a volatile market. He also briefs us about the recent surge in millennials entering the equity markets. Here are the edited excerpts.

  • The current market situation is very volatile. Some sectors that were considered immune to the coronavirus outbreak were also seen slipping recently. What should be an investor’s strategy to deal with such a situation.

Uncertainty always creates volatility. This is exactly what is happening now. It is even more as compared to earlier times because we don’t know when and how long this coronavirus outbreak will last. There is no fool-proof way but a safer way is to stick to defensive stocks like Pharma, FMCG, etc. Another way is to start SIP in Large Cap funds and Multicap Funds.

  • We have been hearing that the current market situation will cause ‘flight-to-safety’ and that is reasonably understood. But, what sectors or specific stocks are these that might benefit under this trend?

You are right, even as the equity markets have shown strong recovery in the month of April, the economic outlook remains uncertain. The lockdown would strain balance sheets of corporates as companies try to manage fixed costs with near zero sales. In such an environment, resilient companies with strong cash flows and impeccable balance sheets will command a premium. Our inhouse research recommends ICICI Lombard, L&T, Maruti, SBI Life, Bharti, Kotak Bank, and Torrent Pharma among large-caps and Navin Fluorine, Ashok Leyland, Deepak Nitrite and Kansai Nerolac among mid-caps. 

  • Various reports have been talking about the surge in millennials entering the equity markets recently, how are you dealing with this?

This is unprecedented and a very healthy trend. Thousands of millennials are entering equity markets and this trend started from March is continuing even now. I feel this is just a start and with markets in a long run giving positive returns to these first timers, the affiliation towards equity as investment class with grow exponentially in coming years. As far as we are concerned, we have geared up our team and also expanding to take care of this increment flow of new investors.

  • Is there a bump in the trading account opening only or are you witnessing reasonably activity in these accounts as well?

New account opening for us has been very healthy. It started with SBI card IPO and then extended for entire March month. For us March month had 80% growth in new account opening as compared to Feb and April is 20% higher than march. So overall it is a very healthy trend and I am confident this will continue in months to come.

  • How are you trading in these times? Any difficulties in running the business and what are you buying in this volatile market?

I personally do not trade in Markets. My personal investments are either in my own company or in Mutual funds through SIP. I have not stopped any of my SIP rather increased a bit more from March. As far as business is concerned, we are 100% operational and working from home. Our 1000 strong team is completely at home and working towards growing business and catering to customers. As 99.99% business is online, it is business as usual for us.

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