May, 2020.
Market Crashes

What you need to know?

The past few weeks has seen a virtually free-fall in the equity markets. If you have invested in equities, surely you would have known this and would be obviously worried. This fall has been one of the sharpest and quickest in the history of the Indian equity markets.

There have been multiple factors responsible for the pandemonium in the markets. The primary reason being that the Coronavirus outbreak was declared as a pandemic by the World Health Organisation. This sounded alarm bells across all major countries in the world. As of today, the virus has spread to over 100 countries. With rising cases in the US and most European countries, the normal economic activity has been severely impacted in these countries. With travel bans amidst infection fears, trade, business, economy, everything has been impacted. Although China is now under control, the shutdown and isolation of China had earlier severely effected the global supply chains. This fear led to massive sell- offs in the global markets in the past weeks. Another international factor was that of falling crude oil prices which negatively impacted the oil economies. Both these factors were on the back of the existing challenges in the economy of slowing growth.

Absolutely no. It is neither the first fall nor the last one you will see. Time and again we have seen many markets crash to the many reasons, both globally and even domestically in India. In India we have seen huge market crashes like the crash of 1992 (Harshad Mehta scam), crashes in 2004, 2007 and especially 2008 which was the worst crash in recent history. There were also some crashes in 2015 and also in 2016 in domestic equity markets. We have gone through huge political uncertainty, wars, riots, scams, corrupt governments, weather fluctuations, demonetisation, GST and everything in-between. How did it impact the markets in the long run? In January 2020, the markets made all-time highs. That's the fact. I am not going into details of how many falls were there and how much the markets returned after every fall. It will take a lot of time without much value addition.The question is what we have learnt from such huge falls?

History tells us the following....

  • There is no way you can predict the extent of the fall and can never find the bottom of the fall.
  • Market crashes provide the best opportunity for people to enter the equity markets.
  • No matter how steep the fall or how quick the fall is, markets do bounce back like handsomely.
  • Such market events occur time and again in the markets and are like a reset button which refreshes the markets.
  • Market crashes throw up winners and losers. It is what you do now which will greatly impact your portfolio returns for the coming few years.

The fall in the markets was sharp and it is in past. However, remember that uncertainty still surrounds us. Existing investors who have already put their money in equities would have seen their portfolios take a beating. Here is what you can do now...

If there is the one thing you should not do – it is Panic. A lot of investors panic when they see their portfolio falling very sharply. And in this panic and fear, they make the most common and stupid mistake. They sell their investments at a huge loss. Remember, that a loss in equities is just notional till you actually sell at lower prices. Further, since these are temporary situations which we all know will soon come to an end, then why panic and sell? The businesses are as good as they were before? Has anything key parameter changed? No.
Let us take an example. Due to coronavirus, a lot of hotels have stopped getting reservations including say Taj Hotels. Due to this, the stock prices have corrected by say nearly 25%. The cost of our Taj hotel is say, Rs.1,000 crores. Will the hotel be now available at Rs.750 cores with a discount of Rs.250 crores? What would you do if you were the owner of the hotel and also as a buyer with Rs. 750 crores? Think on this and reflect as to how one generally behaves with listed equities on exchanges which are very easy to buy and sell.

This is the best you can do. If you had an allocation to equity before the fall, check that allocation now. If it has fallen, it is time to move some money into equities to retain the balance. For example, if equity was only 40% of your total investment portfolio, considering all debt, property, bullion, investments and after the fall it is now at say 30% of your portfolio, then 10% of your present portfolio value should be shifted to equities. This is a plain vanilla rebalancing of asset allocation. If you do not have a fixed asset allocation, then perhaps today is the best time to get in touch with your financial advisor and fix an asset allocation between equities and other asset classes.
Another smart strategy to adopt is to increase your equity allocation. This is a tactical decision which changes your equity share from a fixed asset allocation. The reason for increasing your equity allocation is the cheap valuations presently available in the markets. The downside risk of fair /high valuations is greatly reduced in such markets and hence it is a good time to allocate more money to equities. Let us think of this situation like a huge sale on Amazon where most of the things are available at a huge discount. What would you do?
Following our previous line of arguments, one could also increase their SIP contributions. They could do this by starting new SIPs, starting a top-up on your existing SIP or simply, investing additional lump sum on your funds as when you have the funds. Increasing SIPs is also a good strategy apart from making lump sums. If your SIPs are live, be happy that you are automatically buying at these low levels and timing the markets. These are the periods when SIP investors should be very happy and the exact reason why we recommend SIPs, i.e., to invest in such markets.

If you haven't invested in equities or have been waiting for the opportune time to enter the markets, then the grand bus has arrived at your doorstep. This is perhaps the ideal time when fresh investments can be made into equities. However, we caution that there is still uncertainty and equity still carries the same risk as an asset class. What we can recommend is that adopt a staggered investment approach and spread your investments over a period of time. No one can catch a falling knife. No one can predict the exact market movements and the market bottoms. What you can do though is to buy on every dip and avoid putting all your cash at one go. Remember, cash is king in this market and you have to make smart choices in this volatile market.

What we have witnessed so far has been really astonishing for any student of equity markets. These are the times which will be spoken off in years to come. It is also a humble reminder to us that equities are volatile and anything can happen in the short run. And it is a fact that this too will pass. As a investor, one should know the nature of equity, not panic but make adjustments to our portfolio as per our risk profile. It is time to get in touch with your financial advisor and ask how you can take advantage of this volatility and increase your equity allocation. It is also time to be safe, avoid unnecessary travels, maintain proper hygiene and avoid group participation to fight against coronavirus. We all will have to weather this out as one nation, one community and one family.

Corona virus Meltdown : Time to increase the Equity Exposure
Corona virus Meltdown:

Time to increase the Equity Exposure

Corona virus is a real threat which is disturbing the world and impacting the global economy enormously. Such an extreme situation has never been witnessed ever in our lives where we see many cities /countries, including ours in a virtual lock-down. Countries are in virtual isolation and business has come to a stand-still.

Although the social and economic situation may sound extreme, the world has witnessed several crises in the past viz. epidemics, pandemics, global financial crisis and many more. The one common thing witnessed in such crisis is the knee jerk reaction of the markets and plummeting the markets to bottoms as if there is no tomorrow. While these crises are real and it impacts the world economy and does damage to several people, but the stock market falls are unreal and far beyond such damages.

When and how this crisis will get over is difficult to predict and can only be said in hindsight. However such crises historically haven't lasted long as the developed world is competent enough to come out with solutions to address such crisis. It is difficult to predict the magnitude and impact of such a crisis including the recent corona virus, but we hope it will soon be over.

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Past Epidemics

When to correlate the historical epidemic crisis to the equity markets, we also have some common observations. We have witnessed that such epidemic crises have lasted for a few months and the equity markets have bounced back after that. The following research shows the same

Virus Outbreak SARS Avian Influenza Ebola Zika Corona Virus
Estimated period
Jan 2003 - Mar 2003 Jan 2004 – Aug 2004 Dec 2013 – Feb 2014 Nov 2015 – Feb 2016 Feb 2020 - ??
No. of Months 3 months 7 months 3 months 4 months ??
Returns During
-10.7% -12.23% 1.58% -13.14% -20 to 25%
till date
One year Returns
after the Outbreak
of S&P BSE Sensex
83.38% 50.33% 39.02% 24.14% ???
Source: Mint Research

The above table is the testimony of the bouncing back of equity markets after sharp declines or major crises. We reason is that the equity markets corrected very sharply during the outbreak due to panic and herd mentality in the markets. The fall was broad-based across the markets and there was a steep correction in prices everywhere. This could not be justified on any long term fundamentals factors like expected growth of rate of the economy, business environment, industry outlook, management quality, etc. In the present crisis, we have seen about 25-30% of correction in the Nifty 50 alone till date from the peak levels.

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What can investors do?
As an investor, it would be only natural to be worried. However, there are a few things we should keep in mind...
Do not panic
Stop looking at your portfolio every day
Do not sell and book losses / low prices in equities, unless you urgently need money
Relook at your asset allocation

The importance of the asset allocation strategy is very well known among seasoned /wise investors.

There have been many studies that show us that the asset allocation of an investor is the most important factor and the primary determinant of the long-term performance /returns of the portfolio. A famous and often quoted study done in 1991 has put the contribution of asset allocation to the extent of 91.5% of the total portfolio returns. The rest of the contribution was from market timing, stock selection and others.
However, most of us tend to never look at the overall asset allocation of our entire portfolio across all asset classes like bank deposits, PPF, government savings schemes, traditional insurance policies, gold, property, equities and so on. Indians save only about 5% in equities, which is the only asset class which delivers long term real returns above inflation rate to generate wealth.
Times like these are rare opportunities to relook at your overall asset allocation and invest in equities. You can consult your financial advisor to understand your risk appetite and decide upon asset allocation. A higher level of equity allocation is recommended when the market is available at attractive valuations and often preceded by crisis or a pessimistic economic outlook like currently in India which is primarily because of the corona virus coupled with banking and financial crisis.

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We are in times of uncertainty:

We must also understand that predicting equity markets is inviting failure. No one can do that and say for sure for how long the markets will stay at low levels and regain the previous peak. Practicing asset allocation is the only proven key to Success; predicting markets and timing markets is NOT.

We would also like to say that we are not experts on the present situation and the damage which can happen. What has been written in this article is clearly based on the historical and statistical evidence that every crisis eventually ends and the markets will survive, revive and eventually rise. As far as the present situation is concerned, we can say that the markets have overreacted to the situation which is still evolving.

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In conclusion:

Many investors may be sceptical and scared. However, we would like them to feel relaxed and comfortable. This is neither the first time or the last time the markets have seen panic which is only temporary. Please do not panic and take any wrong decision. Understand that the current loss in equities are only 'notional' but by taking a wrong decision (sell/redemption) one will be making the loss 'real'. Please avoid that. It is also a great time for new investors to enter the markets and have this as a very good starting experience.

We would request you all to be extra careful and stay safe. Do practice basic hygiene strictly and maintain social distance and avoid travelling and meeting people. Corona virus presents a huge challenge to each one of us. We can overcome this challenge as one nation, one community, one society, one family and one person at a time.

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CORONAVIRUS AND <br>HEALTH INSURANCE : Day 41. Lockdown 3.0. India.

Day 41. Lockdown 3.0. India.

“Everything still appears to be unreal and hard to believe. It's’ like we all are a part of a universal, apocalypse Hollywood movie the end of which is yet uncertain. Locked inside the home, there is an undying fear about venturing out and getting infected. The meaning of life has changed.”

We all must be experiencing the above emotions. Over the past couple of months, the world around has changed dramatically. Almost no one has been left unaffected by the ghastly, savage ‘ coronavirus’ pandemic. As per the latest available figures to date, there are nearly 30,000 active cases with nearly 1,400 recorded deaths in India. Globally the figure of active cases stands at around 2.4 million with nearly 2.5 lakh deaths. By the time you are reading this, the figures would have increased further.

One reason why India has done relatively well is that we have been cautious to enforce full lockdown early on. India is plagued with poor health infrastructure, even in many urban centres. For many of us, it is not a matter of whether we can afford treatment, it's whether we will ever receive timely and quality medical intervention. While this is something that the policymakers are thinking about right now, our focus should be on whether we can bear the cost of health emergencies, should we be infected. In this article, we will be talking about health insurance with special focus on coronavirus.

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We won’t spend too much time on health insurance education today. We all must be very familiar with the concept and by now would have also realised its critical importance for us and our family. With an adequate health insurance cover, you would have been protected against expenses that you may have incurred to get the required treatment. Typically an existing health policy, subject to policy conditions, would have covered medical expenses related to diagnosis, consultations - both pre and post hospitalisation, treatment costs and quarantine expenses at hospitals. Though the government has been extending great support, there have been many in India who unfortunately did not have any adequate health cover and have been hit by the double whammy of disease and dearth of funds.
The low penetration of health insurance in India has created a gap of people without any protection against the financial costs of the current pandemic. To plug this gap and with a regulatory nudge from IRDA, insurers are rushing with niche health products and coronavirus-specific insurance policies. Several such plans have flooded the market in the past month or so from all major health insurers. Most of these new policies are fixed benefit covers, which offer a lump sum on the diagnosis of the disease and end after the amount has been paid. The sum assured varies from Rs. 20,000 to Rs 2 lakh and annual premiums are typically low, ranging from Rs 150 to nearly Rs.4,000. Note that these are indicative figures and actual figures may vary depending on a lot of factors. These policies offer a variety of benefits and exclusions for each, ranging from quarantine coverage and per day cash provision to no pre-medical check-ups or consideration of overseas travel history. Note that normal insurance policies also offer coronavirus coverage and can be a better, holistic option. Before jumping to any decision it would be better if you consult your insurance advisor at the earliest.
Yes. As per the guidelines of IRDA, health insurance policies which offer hospitalization cover will also offer cover for medical expenses related to coronavirus, subject to all terms and conditions of the policy. These policies would also likely cover the quarantine expenses carried out at recognised facilities and under registered medical practitioners even if the evaluation reports are negative. These policies may not provide cover if the quarantine is at home or any non-recognised facility for treatment of the disease. Note that certain specific health policies namely Dengue, Cancer, Critical Mediclaim, Super Mediclaim, Heart Mediclaim and Operation Mediclaim may not offer this coverage. It is recommended to read the terms and conditions of the insurance policy to understand the exclusions which are scenarios where the insured person cannot raise a coronavirus insurance claim.
If you already have a basic health plan, you may not need to buy these special policies because your existing plan will cover the treatment and hospitalisation of all diseases, including Covid-19. Who can buy these policies then? If you have no health insurance and are running low on funds, one can think of getting such a policy as a temporary risk cover since it will last a year and may not cost much. It may prove especially useful if you are at high risk. If you are comfortable with treatment at government hospitals at low /nominal cost, such policies can help you cover the small amounts and incidentals. It may be more suitable and convenient for the unbanked, illiterate and low-income population that is not yet insured.

What do you need to remember?

In the past, we have talked a lot on health insurance. Here are the most important lessons we must remember today

To conclude, if you do not yet have any holistic health insurance for yourself and your family, get it soon as possible. Your insurance advisor will help you zero down on the suitable policy and the right, adequate cover.
We wish and hope that you and your family are safe and secure. We stand together with you in these challenging times and are committed to extending any support that you may need. We are here to ensure that your financial well-being is not compromised during these uncertain times.

How to avoid getting infected?

Avoiding is better than cure. The best way to avoid getting infected is by …

Sources:, ,
Accord Investments & Finance

  • mutual fund : debt/equity/elss
  • insurance : general/health/life
  • realty : plots/villas/flats
  • portfolio management system (pms)
  • fixed deposit : company fixed deposit
  • bonds : tax saving bonds

"We have taken due care and caution in compilation of this E Newsletter. The information has been obtained from various reliable sources. However it does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions of the results obtained from the use of such information. Investors should seek proper financial advise regarding the appropriateness of investing in any of the schemes stated, discussed or recommended in this newsletter and should realise that the statements regarding future prospects may or may not realise. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. Past performance is for indicative purpose only and is not necessarily a guide to the future performance."

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