“There was a lot of volatility during the 2008-09 Global Financial Crisis.
But after that, volatility had been muted in the global equity markets.
We saw a period of low volatility between 2010 and 2019. However, Covid-19 has upset that. What happened this year is common; the unusual period was 2009-2019,” said Saurabh Mukherjea, founder, Marcellus Investments.
Volatility in the Indian markets this year has matched that in the US. The Dow Jones Industrial Average, an index of top 30 American companies, has recorded 33 sessions of more than 3 per cent swings. “The situation is unprecedented because we never had a situation where we had a pandemic for four months without either a cure or some preventive measures.
That’s why the markets are more volatile because they don’t know which way to go. Most likely, volatility will continue until some cure is found for Covid-19 and the US elections are over,” said U R Bhat, director, Dalton Capital India.
While high volatility is fertile ground for traders, experts say it can discourage long-term investors. Bhat believes there may be little respite from high volatility in the second half of CY20 with the US elections and uncertainty over corporate earnings and economic growth. “And, there are events other than Covid-19, such as the US-China dispute and the US elections, which can be a source for more volatility,” he said.
“Volatility will remain elevated in the remaining part of the year. The market could go up and revisit earlier highs, but the higher it goes, there are chances of a steeper fall.
Because there is enough bad news
that could hit the market on account of this health crisis and the lockdown. It could be anything from bad economic data, to some big company failing or some bad news
from the international market. Any of this might end result in bouts of volatility,” said Amar Ambani, president and institutional research head, YES Securities.