Is this the time when you should buy fear or is it too early for that?
It depends. Let us hope that whatever is happening does not last too long. If one looks at past wars or situations like this, usually at the end of this event, the market typically tends to bounce back. So there are two ways to look at it. One is to let the uncertainty go by and then buy when there is seeming clarity that it is almost over or you could start buying slowly and steadily because it is really difficult to determine how long this will last and what other collateral damage we could see as a result of that.
These are times to be very steady and way out your options reasonably well but it may not be any harm to watch the situation for a day or two and then you start buying.
What do you do in this kind of an environment? The long-term picture is intact but in the short term, when the pain is so excruciating, should one just hold on to the positions or be forced to rethink the basic strategy looking at how risk is getting adjusted?
Unless you are a trader and you know you have to sell, I think it is crazy for investors to react in this kind of market and sell anything indiscriminately. There is no point in selling into fear. If you look back, at events like this, typically whenever these events wind down, the markets typically tend to bounce back.
So unless it is absolutely necessary, it is counterproductive to sell into a panic like this; whether you want to buy or not is entirely up to the investor’s risk appetite but if you want to buy the fear you should stick to large caps you know high quality names and then let the dust settle down and then you could then venture more into the market but that is what I would do not panic not sell.
What is your definition for largecap? Will it be the Asian Paints and the Nestles of the world? Could it be IT which is still growing?
You could buy largecap banks, largecap tech. At this stage, I would not look at very crude sensitive sectors like paints etc. because you do not know in the short run what happens to crude. It all depends on how long this lasts. Interest rates are also rising and crude is also rising right. So either the Fed will reduce its hawkishness going into an event like this or at some point in time, crude has to tumble after this geopolitical event is out of the way. So buy stuff that has held out reasonably well and this year banks have held out reasonably well. Also, largecap tech is reasonably priced and just buy blue chips and don’t panic in this kind of a situation.
But there is surely panic in the oil market. Brent oil has hit $100 to a barrel for the first time since 2014 and we have a print here of 100 on crude. Just moving away from the largecaps, some of the newly listed stories is something which you have liked in the past. Is that a space you would want to touch at all in this kind of market?
For anything other than largecaps, you should wait and let the dust settle down and then buy right. One does not have to necessarily buy every dip in every company. At this point, I would only restrict myself to the largecaps.
