VBS group wishes all of our stakeholders a safe and stable journey navigating through this pandemic crisis and we feel proud to be navigating your investments through all of this. We have been experiencing a great number of disruptions in our personal, professional, and social lives since the Covid-19 pandemic hit mankind this year. We have always been great believers that the economy is an ever-evolving living organism and every crisis it has ever experienced has given way to new and disruptive opportunities. The way we socialize, get married, work, communicate, entertain ourselves, exercise, travel, and many more things have drastically changed this year due to this pandemic. The major difference at the beginning of this pandemic and now is the magnitude of awareness about the Covid-19 disease and how to deal with it.
The Dark and Bright spots created by Covid-19 in the Economy
The ease of COVID spread leading to widespread panic in our country has driven the economy into a very dark phase. Supply chains have been stalled, manufacturing companies have a shortage of workers and we have seen one of the biggest wave of mass migrations since our independence. Many start-up companies are worried about their funding and cash flows and big corporations are sceptical about repaying their debt or paying their interest with loss of revenue (washout of revenue in some cases). Sectors like food, dining, travel, discretionary retail, and entertainment still do not have much clarity of how their businesses will navigate through this crisis with no or very little revenue. Many of these sectors’ downfall will have a ripple effect in our economy as unemployment and entitlements by the government will see a big spike in the coming days.
As a strong believer in the Darwinian phrase “Survival of the fittest”, and a great fan of “Pheonix rising from its ashes”, I feel this crisis has also given a lot of opportunities to many players in the economy. The health care sector has taken a dramatic shift to more domestic demand for consumption as well as an independent production. Successful remote working has unleashed the potential of our country to become the biggest information technology sector employer in the world with a great skill and knowledge base. Many global giant corporates are looking to set up facilities in our country to fulfil our domestic and part of their global demand.
As far as investing goes, the biggest question we try to ask ourselves is the degree of negative impact for a business due to this pandemic and how much can they recover in the best possible scenario driven by excellent management. Good and efficient management can not only recover a company from a crisis mode but also can search for alternative opportunities and evolve a business. A good example of this is the management of Asian Paints that have come out with sanitizers and protective gear for consumers driving a new avenue of revenue for them.
This blog will help you in deciding investment during the financial crisis.
The immune system of the Economy
All of us now have been familiar with our body’s immune system and it’s role in handling any virus that attacks us. For the crisis in our economy, the major entities that act as the immune system are the governments and the Reserve Bank of India. I personally feel all the levels of our government are efficiently playing their role in handling the pandemic as well as bringing back the economy to pre Covid-19 levels. The central and state governments are doing their best to spend on infrastructure, rural consumption, and providing subsidies/help for those who are negatively hit by the pandemic. The central government backing small, micro, and medium enterprise loans is a very revolutionary step in making them better.
It is almost certain that the governments can neither reduce nor increase the tax rates in the near future but can sell stakes in public sector companies like LIC to raise some money to help the economy. The RBI has been injecting liquidity which has been a significant factor in driving the stability of financial markets. It has been reaching out to banks to be more comfortable in lending and kick-starting the private capital spending cycle in the coming months. We have all experienced the reduced incentives of saving in bank deposits and more incentives in investing or lending with the recent cuts in interest rates to record lows by the RBI.
Two best friends of investing during a crisis and times of uncertainty – Discipline and Decisiveness We have been very disciplined and decisive when it came to managing our stakeholder investments during this economic crisis and its uncertain future. The financial markets have been largely disconnected from the ground level economy but we don’t see that as a sign of panic in the near future.
Our investment decisions have two key elements – a direction (buy, hold or sell) and a magnitude (how much).
We have been able to deliver good results because we stuck to our investing discipline of goal-based asset allocations and our PPP (Person, Purpose, and Price) Investing strategy to determine the directions of our decisions.
We are active managers of client portfolios which give us an opportunity to be decisive and aim for better risk-weighted returns. Macroeconomic data, the financial health of companies, and being familiar with ground reality drive the magnitude of our investment decisions. We feel that this is the right time to look for a financial adviser.
Living through this pandemic has made all of us realize the importance of avoiding economic and other overheads in our lives. Lockdowns, quarantines, and isolations have taught us how minimalistic can we be when it comes to consuming resources in our daily lives. We can give our next generation a better society, a good example to look up to, and a better ecosystem if we can be more decisive about avoiding or at least reducing the amount of waste generated by us even after this pandemic becomes our past.