JOIN USThe volatility index, VIX, or the fear factor amongst investors in the Indian stock markets is at an 11-year high, thanks to the carnage in the markets over the last two months, and the added wild swings, partly induced by the coronavirus, over the last few days. Some 2.78 crore individuals, most of them small investors, have watched helplessly as their investments in stocks evaporated into thin air. Some have not been able to book profits, others have posted huge losses, still others have had even their capital wiped out. No wonder there is so much nervousness. While market investments do carry risks, even the most hardened market makers did not foresee the close to 10% loss in valuations each day in the last five trading sessions on both the BSE and the NSE. Worse, the best analysts, brokers and investment analysts have some sane advice for small investors — the worst may be yet to come.
Stock consultants who actively campaigned for investors’ funds until recently have virtually disappeared, leaving small investors in the lurch. Some enthusiastic buyers that presumed that the markets had already bottomed out may have looked for value-buying into blue chip stocks. Others have attempted to arrest losses. It would be pragmatic not to jump in and take either investment calls or withdraw in a huff given the volatility, which is expected to last several more days. Staying put till this bloodbath and volatility end could be the smarter way. There’s nothing that could actually pep up the markets given that the coronavirus-linked slide has hit the major bourses across the globe — Japan, Singapore, China, Korea, Hong Kong, the UK, Germany, France and India, although the fall has varied from as little as 2.46% in Japan to as high as 11.04% in France. In India, the fall in market valuations on Monday alone was a whopping 7.96%.
Measures rolled out by central banks have not instilled confidence in the stock markets. The US Federal Reserve’s decision to slash interest rates to near zero, buying government debt worth $600 billion did not rally investors. Japan and the UK’s calls to cut interest rates also did not work. Hence, the Reserve Bank of India’s currency swaps to enhance rupee liquidity and long-term repo operations may have very marginal impact in currency and stock markets. Meanwhile, the biggest challenge for stocks regulator SEBI will be to ensure orderly trades, prevent payment defaults and keep sanity in the market. It has a tough but necessary task of putting punters at bay and curbing rumours and speculation, apart from keeping a vigilant eye on short selling.