The fall of 1448 points of Sensex on 28 February 2020 was a big fall, but it was not the biggest fall ever. I have been in the markets since 1979 and have seen bigger falls. However, this has been the biggest fall in the value of my portfolio. Obviously, in absolute terms. I have more to protect now than I had in 1987 or 1999 or even 2008!

So older people with bigger portfolio would have lost more. Surely your 55 year old father would have lost more than what you would have lost at age 27! You just had one ELSS…but your dad had a Rs. 15 crore equity + mutual fund portfolio.

What should you do in such a situation? Well, first of all you should know that “this too shall pass”. The equity markets (all over the world, not just in India, Asia, or China or US) have fallen for a few days (weeks). I am not going into numbers, but the reason seems to be the Corona Virus, and that is not good news. One other way to look at the numbers is to say “this will last say 2 weeks, and the fall is already over”. The other way is to say “this mess has just started and it could keep falling permanently”. Another way is to say “this fall is temporary and we will recover in a few weeks or a few months”.

There is another way to look at it. Yesterday (27 Feb, 2020) I did a post on Value Investing. Growth investing had started looking better than value investing – and the last 10 years data was making the Value investors look worse off. The markets are (were) over valued all over the world – surely US and India – the big 2 markets for the people reading this blog. The markets were just waiting for a small tip to fall over. The corona virus has provided this tip. Will it keep falling? I do not know. Will it go up in a hurry? I do not know. Remember the SIP amount in the Indian market is about 1.2 Billion US $ a month, and is cushioning all the withdrawal by the FII and the HNI. The ETF, EPFO, NPS – all this money is going into the Index – mostly to the top 100 listed shares at best. So some of the fall will be cushioned. The Government is short of money, so the equity ETF of Psu+ Suti will continue and will continue to depress the price of the PSU including LnT, ITC and Axis bank. I have not done an analysis of how much of the ETF is being shredded and the shares being used for delivery for a deal done long ago. The market knows in advance how many shares are being issued – and hence the shit has hit the roof.

HUL can’t go down. If Rs. 3000 crores is pumped into HUL on a yearly basis, the price has to go up. HUL is about 4-5% (willing to be corrected, I am writing from memory, not research) and that means the share will be pumped up REGULARLY. Scary at best.

Times are different. However a 3% fall should not scare you. If you have invested for your child’s education 17 years later or for your own Retirement 25 years later, remember the Corona virus is a scare, but will fly away when the sun shines on it.

What should you do?

1. Stay calm and stop looking at your portfolio.
2. Your portfolio will look terrible, but look at the returns over a 10 year period not a one week period.
3. Reduce your expectation. If the Risk free return is about 8%, you should expect about 10-12% return in equity investing.
4. If the Risk free Return falls to 6%, reduce your expectations from equity to 9%pa
5. Fairly obvious Return expectations from Debt should be 6-8% – depending on tenor, risk, and category.
6. Understand that if you have been investing in the US markets, they are also down – so the co-relation is not happening this time. Next time it could be different.
7. If inflation is high and RBI raises interest rates (instead of decreasing) your debt funds will take another hit. Be ready.

Be ready for a world which shocks you. All unreasonable things lead to world upheavel…and then world peace. Remember “this too shall pass”.

http://www.subramoney.com/2018/09/why-markets-fell-1400-points-yesterday/?frame-nonce=80ebca2ac9