With increased exposure to the stock market and investments, almost every person today is invested in the market either through ULIPs, mutual funds, equity etc. But with the ongoing global outbreak of the Covid-19, what changes for you as an investor? Read on to know.
The pandemic has completely changed the face of our stock market. Nifty has dipped from 12,400 points to a meagre 7500 points. Sensex has also fallen from 44,000 points to 26,600 points. It has caused panic among regular investors and scared the new ones away. But when compared to the Global Financial Crisis of 2008, as everyone around is doing, while the pandemic is surely at a larger scale, the valuations are as cheap as they were then.
For instance, the price to book Nifty before the outbreak of Corona was at 3.35 which is now at 2.17. But in 2008, it saw a steep fall from 6.03 before the crisis to 2.35 during the crisis. Thus, although currently we are at a lower price to book and are oversold, it is a very good time to start picking stocks and Global Financial Crisis but only for the longer period of 3-5 years.
The Price to Earning Ratio is at a 14-year low at forward earning 12 PE and the Market Cap to GDP rate is at 48% as compared to 43% in 2008 during the Global crisis. The ideal range however is 90-110%. The dividend yield of Nifty is 1.9% which is high and healthy
Thus, in hindsight, it is a great time to invest in the market. The crash in the market has led to great valuations within the market. If you are already investing then continue to do so. Do not pull out or switch your funds. However, if you are invested in debt funds, you can make a gradual shift to equity. If you have more funds at hand, it can be profitable to park them right away. Do your research, ask your expert, take guidance and take the plunge. It might seem like a risky period, but post normalization, the market too will recoup within a couple of years.