Investment Ideas during COVID 19 Menace: A Smart Approach
Article contributed by Prof. (Dr.) Ritvik Dubey, Director – Faculty of Commerce & Business Management, Amrapali Group of Institutes Haldwani
The Covid 19 Crisis has brought about the blood bath in the stock markets worldwide. The severity of this can be gauged from the fact that the nifty came down to the levels of 7500 from the all time peak if 12340 plus. Most of the stocks are available at 40%-80% discount to their all time high prices. This makes the investor tempted to invest. But the irony is how to go about it. This article will explore the way to do it in a smart manner and also would throw light on the factors which will bring about the change in Investment behavior.
There are number of articles covering at length the instruments and techniques and manner for investing. Investments are important because in today’s world, just earning money is not enough. You work hard for the money you earn. But that may not be adequate for you to lead a comfortable lifestyle or fulfill your dreams and goals. To do that, you need to make your money work hard for you as well. This is why you invest. Money lying idle in your bank account is an opportunity lost. You should invest that money smartly to get good returns out of it.
Here I would like to draw the attention to the smart approach for investing specially during the Covid 19 era. The themes enumerated below will give you an idea about the sectors to look forward to, research & invest:
The Emerging themes:
1-Speciality Chemicals
2-Real Estate
3-Digital Boom
4-Infrastructure Boom
5-Contract Manufacturing
6- HealthCare Boom
7-Personal Space (Small ticket Consumer Vehicles)
The Age Old themes:
1-Cement
2-Iron & Steel
3-Engineering
4- Telecom
The reason for suggesting the above themes are as follows:
Printing of currency by almost all the Central Banks which will increase the liquidity in the market and people will be tempted to invest.
After a certain time the monetary policy will not be enough and the fiscal policy will start playing an important role. Stimulus by the Government in these areas will surely kick start the recovery cycle.
Having said so and as it happened after the world war the infrastructure development will take central priority and thus will bring about the infrastructure boom.
The companies with either no leverage of less leverage as far as equity to debt ratio is concerned will emerge as winners.
The changing pattern of Online Entertainment, Online Work from Home, Online Classes etc will certainly bring about the digital boom.
Indian Share markets are almost certain to get billions of dollars in foreign fund inflows, with the regulatory changes allowing for higher foreign portfolio investment limits in various companies. Eg: Change in MSCI Index.
The change of attitude towards China as manufacturing destination will bring about a phenomenal change in Indian Manufacturing sector, the Make in India is set to receive a boost. The contract manufacturing is one such practice which is set to emerge as the game changer.
With the digital boom happening the demand for commercial space will decrease and the flow of liquidity will help the residential spaces to have a relook. Therefore the real estate per se shall be in demand.
The need for personal hygiene and personal space shall bring down the Ola/Uber bookings as more and more people will look for their own vehicle for host of reasons. The low ticket personal vehicle space will lead to fill this requirement and therefore will be in demand.
As the crisis has taught the value of Healthcare, the hospitals, testing labs and pharma companies will be required. Increased allocation towards creating robust healthcare system will bring about the healthcare boom.
For factories to be made the demand for steel, iron ore, cement, engineering solutions will be in demand and therefore there production will increase.
The telecom sector has shown how the world cannot operate without it even during the lockdown. All the concepts of connectivity cannot take place with telecom companies offering variety of services. Therefore going forward the telecom sector will outperform.
The Specialty chemicals or chemical space as a whole has witnessed a major shift during past few years. India as a destination for Specialty Chemicals has seen an uptick.
This crisis has taught the people about the importance of savings and these savings will move to host of assets including the stock market.
Conclusion:
The increase in the huge pile of debt (highly leveraged companies) for few companies will ultimately prove detrimental for them and will find it difficult to survive. So selection of companies to invest will be a key and the most important factor to look for is that the stock selected doesn’t have huge debt burden to service. The balance sheets for both the households and the companies will be keenly watched and the consumption pattern of the consumers will provide the clue for stock selection.
Note: Please consult a qualified financial adviser before investing.
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