Latest News | Volatility in Mkts Friend of Long Term Investors as It Makes Good Stocks Attractive: Analysts

New Delhi, Jun 1 (PTI) Equity markets are likely to remain volatile till there is semblance of normalcy returning, analysts at Motilal Oswal Financial Services said, adding such volatility makes good stocks cheaper.

Global equity markets have been volatile in the last two months due to the coronavirus pandemic, which has become the biggest threat to the global economy and financial markets, they said.

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"Till we see a semblance of normalcy returning, markets are likely to remain volatile. In such times of global volatility, retail investors should keep calm and not panic.

"Once the pandemic comes to an end, there will be a slow and gradual comeback of organisations to their normal operational level and growth will come in as systems are again put in place," said Ajay Menon, MD & CEO, Motilal Oswal Financial Services.

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He said major economic issues in the past have impacted the market, which has recovered over time.

"In fact, such sharp correction and volatility is the friend of long term investors as it makes good stocks cheaper and attractive. More stimulus measures are likely to be announced in the coming days as various governments have adopted a phased rollout approach.

"Hence, we believe that these measures could potentially help in avoiding a hard economic landing (smoothen the economic slowdown impact in the near term)," Menon said.

Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services said, while the first round of the pandemic spread has caused havoc across large economies, there is a fear of a second wave of pandemic spread and extended period of economic slowdown.

"The earnings season and the management commentaries so far also suggest more volatility and disruption in earnings ahead. We expect the market direction to depend upon the spread and intensity of COVID cases, development around vaccine and incremental government/regulatory actions to restart the economy," he said.

Investors should also track how soon economy is able to get back to normal and the situation on the banking NPAs/moratoriums front.

"Developments around the trade tensions between US and China are resurfacing and could be another risk to keep an eye upon," he added.

Since February onwards, markets have fallen sharply with the Sensex tanking over 7,000 points till date. March was the worst hit month as the index had plunged 8,828.8 points then.

"In the past crisis, we note that combination of extreme fear and attractive valuations provided good foundation for healthy long-term equity returns. Thus the best strategy for investors would be to accumulate good fundamental and quality stocks gradually over the next few weeks and months. Markets may continue to remain volatile and any fall in near-term would be the time to become greedy," Menon said.

He said stocks have the potential to give higher returns but also carry higher risks.

The analyst also favoured use of a new model 'PHYGITAL' (mix of physical and digital approach) in their business to attract prospective investors and to service existing clients.

"Good digital interface can prove to be a prompt vehicle to trade while a good counsellor ensures that wise investment decisions are taken. This certainly makes PHYGITAL model the need of the hour in broking," Menon said.

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