Virus-Hit Market Like A Buffet, Pick What You Can Digest: Madhusudan Kela
It’s not prudent to keep tracking prices in the near term, MK Ventures’ Madhusudan Kela says.
For Madhusudan Kela, the virus-driven panic selling has turned the market into a buffet—too much to choose from.
“It’s like a buffet which is out there, you have to eat as much as you can digest and you have to choose what you like,” the founder of MK Ventures told BloombergQuint in an interaction. He advised investors must keep their cool and follow certain precautions.
Indian stocks have tumbled in one of their worst routs in more than a decade amid fears that emergency fiscal and monetary packages won’t be enough to stave off a slowdown as the coronavirus outbreak stalls trade.
Kela expects the volatility to continue and advises patience.
“You must have the stomach to digest this volatility, because if you buy something today, it’s very possible that it will go down 10-20 percent over the next 2 or 3-4 weeks, in spite of the fall which we have seen.”
It’s not prudent to keep tracking prices in the near term, and the strategy is to remain invested in a company for a duration longer than a short-term trade, he said.
“Point is, you should know what you are buying into. So, today if I can see so many good blue-chip companies have corrected so significantly and they’re available at very attractive valuations, you can choose either one,” he said. “If you’re a retail investor buying a mutual fund, choose the fund carefully, I would say invest systematically over the next 30 to 45 days and keep a horizon of three to five years.”
On U.S. Markets
They have had a fantastic 11-year bull run in the U.S. markets. Must take that into perspective when forming a judgment, he said. “When you’re overbought, when you’ve made so much money over the last year, where the S&P and Dow returns were at 30 percent—unheard of in the history of U.S. equity. So, markets clearly were in the greed cycle.”
The markets needed a reason to correct and coronavirus is just a reason to correct.
Impact On Earnings
- There will be an impact on economic activity, not only in India but around the world, at least for the next one to two quarters.
- Even if these things get sorted out, let’s say in the next one month or two months, it will be difficult to assume people will get back to their earlier lifestyle, they will travel across the world. It will take a little while.
- Industries like airlines, travel, restaurants, pubs, and bars will definitely get impacted, at least for the next two quarters, assuming that there will be some control over coronavirus in the next one to two months.
- It’s anyone’s guess as to how much impact will be there. But if you’re working with, let’s say, a 5-10 percent impact on earnings per share, it’s entirely possible.
WATCH | Madhusudan Kela On Investing Amid Virus Fears