What also complicates the matter is that when about a decade ago, the markets
slipped into the recessionary phase caused by the meltdown of large financial institutions, abundant injection of liquidity was a good enough solution. But, this time around problems are different. “In 2008, ahead of the market crash, the economy was at its peak. In the current correction, several economic factors have been depressed for some time,” says Mahesh Patil, chief investment officer-Equity, Aditya Birla Sun Life Mutual Fund. Also, as Mihir Vora, director and chief investment officer, Max Life Insurance, points out, the GFC was a case of financial sector stress impacting the real economy in the West. “Today, a forced economic shutdown is impacting the financial markets. A series of events and uncertainties lingering for long and sentimentally, things are different from the GFC times.”
Compiled by BS Researcu Bureau
This is why, experts feel, India Inc’s earnings for the two quarters starting March 2020 may come under severe pressure. When seen in this context, valuations of stocks, such as Tata Consultancy Services, Titan, Asian Paints, Dabur, Britannia, and Havells, despite the correction, remain expensive for investors considering the growing uncertainties on the demand and profit fronts. While valuations of HDFC, HDFC Bank, L&T, and Reliance Industries are near-about their GFC levels, they haven’t become completely affordable just yet.
Names such as JSW Steel, Adani Ports, Mahindra and Mahindra, Hindalco and Motherson Sumi faced with extreme demand and supply constraints, where growth has been under severe pressure for two–three quarters, are some that have become cheaper now. That said, ITC, Indian Oil, ONGC, Bharat Petroleum, Bajaj Auto, Cipla, and Aurobindo Pharma are among stocks trading below their GFC valuation levels.
This is why domestic fund managers advise investors not to take their eyes off equities in the current downturn. “The market may bottom out one day, but all stocks will not bottom out on the same day as the overall indices. Investors may want to keep a list of stocks ready,” says Vora. In addition, Sampath Reddy, chief investment officer, Bajaj Allianz Life Insurance, says the prudent thing is to at least get started and not to panic and sell-off. “Historical data has shown that investments made in challenging/volatile times have generally been quite rewarding for investors over the medium to long term,” he adds.
Therefore, while the large-cap stocks may not have turned entirely attractive, depending on the individual risk profile, the current market conditions offer an opportunity to accumulate some of them, though not in large quantities, just yet.
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