The West Asia war has impacted oil, weakened currencies and spooked markets, with the Sensex crashing 2,345.89 points to hit its day’s low of 76,573.01, while the Nifty 50 tanked 711 points to 23,739.20. Overall, on 9 March, investors lost ₹12 lakh crore, as market capitalization of BSE-listed firms dropped to nearly ₹438 lakh crore from ₹450 lakh crore in the previous session.
Amid this volatility, Deepak Shenoy, founder and CEO of Capitalmind AMC feels that retail investors should look at a “measured allocation” strategy going forward. In a post on social media platform
Why have the stock markets crashed?
Prolonged geopolitical tensions in the Middle East have hit the Indian stock markets, which saw sharp losses on 9 March triggered by spike in crude oil prices, wide risk aversion, rising bond yields, and currency weakness.
The extended war between the United States, Israel and Iran has blocked shipping through the crucial Strait of Hormuz route. The chokepoint handles about 20 mbpd of oil — around one-fifth of global consumption — and around one-fifth of global LNG trade, mainly from Qatar. The stoppage has pushed crude prices up 25% to over $116/barrel, after a 28% rally last week.
The Indian rupee has also been hit by the energy crisis, hitting a record low of ₹92.3 today. Analysts warned that a sustained rise in crude prices could impact India’s inflation outlook, current account deficit and monetary policy trajectory.
With no sign of the war being resolved soon, Mojtaba Khamenei, son of the slain Ayatollah Ali Khamenei, appointed as Iran’s new supreme leader, and US President Donald Trump downplaying the energy crisis, markets reacted negatively.
Deepak Shenoy’s advice: Don’t panic sell
Noting the cost of war, Shenoy sought to direct investors towards more measured allocations instead of panic selling.
“Blood is on the streets. Sadly, even literally. Portfolios will bleed too, and this time it’s a man-made disaster. We’ve seen these before, and we’ve emerged eventually out of them better, but man-made disasters tend to take a little longer,” he wrote.
Noting that as a mutual fund CEO, he is “biased towards telling you to invest”, Shenoy added that he also honestly believes this is the time to be strategic with your investments, rather than panic selling.
“I honestly believe that market drops provide opportunities, but there’s no way to say what the bottom is, so any lumpsum investing should be spread over a period of time — could be three months to a year. But it’s a period when the red in your portfolios will turn out to be an opportunity, not a permanent colour,” he stated.
‘Can’t see anything good from ‘sell now, buy back later”
The ace investor noted that it is still too early to say the market drop is over, but advised a more measured approach. “We are just about 10% below all-time highs on the Nifty 500 and we have seen more. But the 10% drop is usually a good point to start looking at measured allocations going forward. A lot of cash has been on the sidelines, and if you have a 3+ year view, it does make sense to consider allocating cash,” he added.
On diversification too, Shenoy feels that it could cushion some of the fall and should make investors less fearful, adding, “You might say we managers talk our book, but I can’t see anything good coming out of a “sell now, you can buy back later” — mostly because in my experience, when it sounds like that is the best option, it’s usually the worst option in hindsight later,” he added.
Shenoy’s view? “Things are going to look bad, brace for it, and where opportunities rise because of panic selling, you might be better off on the buying side,” he added.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
