Is equity market crisis an opportunity? Beware, don’t get hopes too high, warns billionaire hedge fund manager

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Published: March 25, 2020 1:19:20 PM

Marquee names on the BSE have shed on an average 21 per cent in share price since the beginning of the year. However, Samir Arora, thinks that this is not the time to look at the current turmoil as an opportunity.

Meanwhile, central banks could provide comforting signals to stressed financial markets that they stand ready to further ease monetary policy and provide liquidity to banks if needed. (Representative image)Arora warned investors against believing the hypothesis that every crisis can be turned into an investment opportunity.

Share markets have tanked more than 30 per cent since the beginning of this year. Marquee names that make-up the top 5 companies on the BSE have, on an average, shed 21 per cent in share price since the beginning of the year. However, Samir Arora, Founder and Fund Manager, Helios Capital, thinks that this is not the time to look at the current turmoil as an opportunity. “It is not necessary that if there is a problem there is a solution to it straight away. I don’t think we should look at it that every crisis is an opportunity from day 1 or week 1 of crisis,” Arora said in an interview with ET Now. 

Arora warned investors from believing the hypothesis that every crisis can be turned into an investment opportunity. He added, “There are examples how people did well when they invested ahead of the world war in japan or in December of 2007, but I don’t like the problem on the other side of this equation as well where you say today there is a problem and today only I want to take advantage of it because there are scenarios that are theoretically very bad and they can not be ruled out.” 

Claiming that he is not in the business of bringing returns from lesser known stocks, Arora advised investing in “guaranteed survivors” that have fallen either in line with the market or less than that. “I don’t subscribe to the theory that this is a gift someone has given us, it is a negative so we have to cope with that. No need to buy stocks that are down 70-80 per cent look at the least fallen stocks like 30 per cent in the current market situation. But this is not right to buy socks that haven’t fallen. If you pick those then what is the point of this market weakness?” Arora added.

Equity markets have witnessed their worst single-day fall during the week, sinking more than 3,900 points in one day. Since the beginning of the year, Tata Consultancy Services has fallen close to 20 per cent; Reliance Industries is down 32 per cent; HDFC Bank is down 38 per and Infosys has lost 20 per cent, Hindustan Unilever is the only name among the top-5 BSE companies to have gained 8 per cent since the beginning of the year.

“If you say that you want to make this crisis into a massive opportunity, not just make 10 per cent in one trade. That confidence neither do we have nor do we want you to believe we have it.,” Arora said, warning investors. SIPs however, were not to be exited at this point according to the fund manager. “Nobody needs to stop their SIPs because when the market is down beyond a point maybe some stocks don’t come back, some fund managers don’t come back but markets will always come back.” he said.

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