Extension Of Lockdown: Investors Must Diversify Their Investments

At the beginning of the year many investments managers, wealth mangers and broking house release an outlook for the year. The year 2020 was no different. All these companies published reports with varying targets on Nifty and 10year - G-Sec. The overall economic assessment is done to finally advise investors which asset class on which is likely to outperform and which sectors are expected to gain meaningfully.  However, by mid of March, like the other nations in the world, India was hit by COVID-19, changing the way we live and work. The lockdown that was implemented on March 25, 2020 for 21-days has beenextended till the end of April 2020. Due to this Black Swan event in all spheres of life and especially in financial markets, all advisors, wealth managers and brokers are continuously monitoring, reviewing and altering the investment ideas. Many investors are wondering how to navigate the supply and demand shocks, and questioning, “where do we go from here?”

On the other hand, China seems to have been successful in containing the coronavirus. Overall, cases have declined considerably, and economic activity is resuming. The government’s focus has now shifted away from containment towards economic normalization, with restrictions gradually being relaxed. Nonetheless, changed behaviours are myriad andcan have a far-reaching impact.  

Most countries are still grappling with COVID-19. However, the good news, is that the monetary and fiscal policy responses appear to be prompt and decisive. A coordinated combination of fiscal and monetary support can act as a bridge to help individuals and businesses weather the downturn and can set the stage for a robust rebound.  All major economies that are impacted have announced enormous liquidity support.

There is a significant drag on economic activity globally.  Lockdowns are leading to unprecedented and massive shocks to the global economy that are likely to reverberate for several quarters. In this highly uncertain environment, it is imperative that investors adopt a holistic approach to portfolio building. This is an opportunity for investors to reposition their portfolios and to take advantage of this extreme dislocation, because the medium to longer-term outlook continues to remain positive. Today, it is anybody’s guess if the recovery will be V-shaped, U-shaped or L-shaped. However, whatever be the shape of recovery, investors must seize this opportunity and diversify their investments and choose wisely. It is important to continue investing in the markets in the current time.