The latest coronavirus pandemic has caused the Indian benchmark indices to collapse record levels. However, investors should not worry as all is not lost.
The growth of the Indian economy has slowed down over the last two years. The Sino-American trade war, a slowdown in the global economy, falling rupee, some economic and monetary policy decisions have had a direct bearing on the Indian economy and markets. The government and the Reserve Bank of India (RBI) have taken several measures to boost the growth, but it has stayed subdued. The Finance Minister of India announced growth boosters in two stages in the second half of the last calendar year while the central bank cut interest rates for a whopping five times.
All these were done in a desperate move to beat the slowdown and improve the market sentiment. When things seemed right, the coronavirus outbreak has now turned out to be an even bigger challenge to overcome. The latest pandemic has caused the Indian benchmark indices to collapse record levels. However, investors should not worry as all is not lost. The current market condition is temporary, which is induced by the spread of coronavirus. The markets will pick up in the coming days once the virus is contained. Here are the investment options one can look at when the markets are slowing down:
1) Equity Mutual Funds
Investing in equity mutual funds is an excellent investment option not only during a market slowdown but any time. This is due to the fact that the mutual funds are managed by fund managers who are finance professionals having an excellent track record of managing investment portfolios. The investors can benefit the most out of the current scenario by investing in equity funds as the fund managers are likely to make right calls of selling, buying or holding on to the suitable stocks. Also, investing in equity mutual funds via systematic investment plans (SIPs) over the long term (5 years or more) will prove to be beneficial as the investors get the benefit of rupee cost averaging and scale. Staying invested for a long-term is the key to success in the case of any equity-linked investments.
2) Index Funds
Index funds are a special kind of mutual funds that track a popular stock market index such as the S&P BSE Sensex and the NSE Nifty 50. The main objective of index funds is to emulate the performance of the index it is tracking. This is done by investing in the same stocks that the underlying index consists of. Investing in index funds will prove to be a great decision over time as indices have gained significantly over the last few decades. The BSE Sensex was hovering around 5,000 points in March 2000. It grew to touch the 6500 levels by March 2005. By March 2010, the BSE Sensex was on the brink of crossing the 18,000 barriers. Furthermore, it gained massively to float around 27,500 points by March 2015, and it passed 40,000 points in 2019. Therefore, regardless of what the market conditions are, investing in index funds is a great option.
3) Blue Chip Stocks
Blue-chip companies are those that are well established and are not affected much by the market movements. The stocks of these companies are referred to as the blue-chip stocks. These stocks have made a name for themselves among investors. Experienced investors turn towards blue-chip stocks at times when markets seem volatile or have remained subdued as they offer much-needed stability. One thing to note about blue-chip stocks is that they don’t offer high returns like small or mid-cap stocks do. However, that will be compensated in the form of stable returns.
When the markets have slowed down, the return on investment options such as bank deposits and post office deposits would be lowered, and thus they don’t seem attractive. The only way that one can enjoy high returns is by investing in the options mentioned above.
(The author is Founder and CEO, ClearTax)
Disclaimer: This is the view of the author. Readers are advised to consult their financial advisor before making any investment.