Is It The Opportune Time For Value Picking From The Crude And Corona Hit Markets?

The spread of Coronavirus has been creating mayhem in the markets across the globe every passing day; many of the indices are at their multi-year low. While the number of coronavirus cases keep on rising, another factor that has further induced selling in the share markets, erupted in the form of an oil price war, with Saudi Arabia slashing its oil prices to capture market share and a simultaneous production increase, in retaliation to its onetime ally Russia’s refusal to go for a production cut. The oil shock has pounded the already struggling stock markets due to the novel coronavirus outbreak. By now, the virus spread has infected more than 130,000 people globally, and over 4,500 people have reportedly been killed due to it.

With rising cases of confirmed Coronavirus infection, the UK benchmark index FTSE 100 suffered its steepest falls since the 1987 market crash. More than trillions of dollars have been wiped out in the mayhem so far from across the global markets. Now, the major concern is how long will it take to contain the pandemic and what level of disruption the economy is likely to face with it.

The grim outlook for earnings and economic growth has currently become the focal point of discussion among the financial circle, while the first quarter is near its end, the actual economic impact from the outbreak will be felt in the second quarter. Lots of businesses have already started assessing the blow from the outbreak and have begun working on the contingency plans. Investors have started ditching stocks for the safe-haven asset. But if you move to just three months back scenario, for investors, a bear market in equities was not at all on the radar, rather the optimism was rising, and turnaround picture was in sight with banking, mining and property stocks showing improvement and presenting themselves as the probable leaders of the next rally. Considering that, the present situation does not call to press the panic button and flee away as the situation has turned grim; instead, you need to look for value picking, to balance your portfolio with what you had missed in the past and regretted because those gems are now affordable and available at a much attractive valuation.

So, the question is if one should be going in for a bargain hunting at this juncture? Of course, yes, neither the stock market nor the willingness to make money from it, is going to die with the fear of Coronavirus. If you have to thrive, you need to look for opportunities amid the distress. There would always be plenty of stocks in the market that can offer you outstanding value if tapped at the bottom; you just have to judiciously spot the possible winners among them.

First, let us understand what exactly the bargain hunting is, in a layman’s language, it can be called an opportunity to pick well established and fundamentally strong stocks at a lower price. It’s not something which will require great expertise; rather, it would require a clear vision and some courage to go for the beaten down. But before you go for the value picking, you also need to consider and access the impact of the recent developments on the different sectors. Stocks should always be picked considering their past performance and their current competitive advantage; the prospects of the industries they are in and not to forget, their valuations.

Fear stricken markets present an opportunity; if you are a long-term investor, you just need to grab it. Corrections are the nature of the market, and once the market recovers from them, it catches momentum with many new players and various new strategies to counter and cope with the next correction. Investing in stocks is one of the best ways to build wealth over the long term, and as mentioned above, a downturn is usually followed by an upturn, so you need to wait and remain invested for the upturn to evolve. Historical data shows that bear market scenario last for comparatively less time than the bull markets. Though it’s not very easy to build a contrarian view of predicting what is stored in the future, it really makes a difference to think on that line. After a market meltdown, the earnings growth expectations turn lower, and hence the chances of outsmarting the beaten-down expectations are extremely high, leading to a better future performance of the stock. In the most likelihood, manufacturing will pick pace in China after the second quarter, as it is one of the few nations who have effectively contained the spread, with the number of infected rising at a very slow pace as compared to other nations in last some time. Once some remedy is in sight, the confidence will return to the market and then it may be too late to catch the bus. Diversify your portfolio, look for value stocks, stay calm and patient. But here again, one should not be overconfident, as volatility too is the nature of the markets and to have adequate funds, including cash is always advisable, to meet any unexpected or sudden requirements like the Coronavirus impact.