PANDEMIC: THE IMPACT AND EXPERIENCE OF INVESTORS.
The world was an entirely different place just a few months ago. A lot has changed since then and many of us are going through challenging times. Change is not something new and as Indians, we are good at adapting to change. However, the pace at which the change has been forced upon us is definitely new. While we are still trying to restart our lives and overcome our fears, perhaps we have already changed. Staying longer at home, many of us would have got ample amount of time to think about our lives and things that matter to us. Many of us have learned valuable lessons and have a new understanding of life. With few months passed, we shall now try to summarise the impact of the pandemic and look at our experience as investors..
HUMAN IMPACT
Covid-19 is unlike anything we have seen in our living memory. Surely, the world has seen many epidemics in the past but the impact of COVID-19 has spread to every corner of the world and has been brutal. As of 25th June, we have nearly 9.74 million total cases, 0.492 million deaths and nearly 3.97 million active cases worldwide. As the fourth most affected country, India has nearly 1.91 lakh active cases and over 15,300 deaths. The worst affected country by far is the US with 1.27 lakh deaths. The worldwide travel bans, lockdowns and social distancing norms have also had a huge impact on jobs and businesses. The migrant workers' situation in India showed us the extent of the impact. There are no numbers to estimate this aspect of the impact as of now. Going forward, we only pray that the pandemic will subside and there will be no alarming rise in the numbers as mentioned above. Fingers crossed.
The unprecedented crisis we are seeing today has impacted almost every industry. Some industries like hospitality, tourism, entertainment and airlines have been worst affected. On the positive side, the crisis has also benefited industries like IT services, pharmaceuticals, health and insurance. Every economy has suffered globally and India is no exception. However, while there is a prediction for lower growth this year, people are mostly expecting a sharp rebound next year and beyond. The government has been proactively taking a lot of bold and positive steps in many sectors. It has also announced a targeted economic stimulus package of Rs.20 lakh crores to help businesses survive and push economic recovery. The factories and businesses are also slowly restarting. We have to only wait to watch as the situation evolves.
THE LIFESTYLE IMPACT
Before the pandemic, we were preoccupied with ourselves, our careers and our needs. Today, after having been forced indoors amidst fear and uncertainty, many have realised the true value of family, friends, health and living a balanced life. We have realised that true happiness lies not in wealth or fancy gadgets or lifestyle but in many other subtle aspects of life. Businesses also have been pushed to realise the benefits of adopting new technology, digitisation and are now getting comfortable with online meetings and WFM or work-from-home for teams. Many corporations are already planning to shift many roles to permanent WFM in future. Surely, there is a clear change in our thinking, the choices that we make and how we communicate, work and live in the post-COVID-19 era.
THE EXPERIENCE WITH INVESTORS
Investors have been directly impacted by the crisis without a doubt. Most of us have seen huge volatility in our investment portfolio in the past few months. After falling sharply, there has since been a good revival in the markets and they are in an uptrend as of today. From the recent highs of 12,362 (14th January) to the low of 7,610 (23rd March), Nifty 50 had a fall of over 38%. However, since then, the markets have recovered a lot of lost ground to be at 10,383 and the net fall now stands at 16% only. Since March’s lows, the markets have had some sort of a rally rising over 36% and the new investors must surely be smiling today. In the likelihood of volatility continuing, SIPs offer the best opportunity to benefit in the current market.
It has been heartening to see that Indian equity investors did not panic in such volatility. Long term investors saw an opportunity in the falling markets and also more new investors entered the market and sought to benefit from the bearish markets. Reportedly, about 18 lakh new accounts have been opened since March. A large number of investors have also started new SIPs. However, due to the impact on disposable income, we have also seen a higher percentage of stoppages. Here is an interesting fact; more people have entered the markets from the non-metro, tier 2/3 cities as compared to metro cities. There are expectations that India will recover faster compared to other economies and continued investments/SIPs will deliver attractive returns.
On the other side, the experience of investors in bank FDs and small savings schemes have not been pleasant. They have been affected by falling interest rates. On March 31, rates were cut sharply on all instruments barring saving deposits, between 0.50% to 1.40%. The rates are set to be revised again in July month and are expected to see further fall. Investors in real estate and those dependent on rental income too have been badly hit. Many of these investors are worried and uncertain about the future. Some of them are now looking at equities for better long-term returns.
There is also a growing awareness of insurance among people. India has a very low penetration of life and health insurance. The Covid-19 crisis has made people realise the need for ‘adequate’ insurance coverage. Those who already had policies did feel some peace of mind that Covid-19 was covered. A lot of new policies are being digitally sold now in the lock-down. Post normalcy returns, we are likely to see a sizable increase in sales of these critical products.
Needless to say, there has been a sizable increase in the savings of those whose incomes haven’t been impacted. With no avenues of spending left open, many are saving much more and now channelizing their savings into investments. People are realising the importance of having investments in liquid assets. This change in behaviour in favour of spending less and saving more is unlikely to change any time soon.
CONCLUSION
The world is going through a reset. The pandemic has impacted each and every aspect of our lives.
However, our will to fight back, adapt to changes and make the best out of our situation cannot be underestimated. Our experience will make us stronger, bind us together and make us better a person. Getting better at investments and finances is just one small part of it. Remember, every adversity also presents an opportunity.
We hope that you stay safe and healthy through these unprecedented times and practice all the necessary precautions to avoid getting infected. Wish you the best of luck.
HANDLING UNCERTAINTY: LESSONS
Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market
- Warren Buffet
These words spoken by the investing legend has proved to be true in the present market conditions. The past two decades have seen a few such times of uncertainty and market crashes. Beginning with the dotcom bust in 2000, quickly followed by the 9/11 crisis in 2001 and later the global financial crisis in 2008-09. Time and again, the message to equity investors has been clear.
