Top 10 Stocks To Buy Now Due To Opportunity From CoronaVirus Market Correction

Market correction due to Corona Virus offers an opportunity…

Market Volatility is an Investment Opportunity

Markets have corrected sharply over last couple of weeks on account of the outbreak of nCov- 19 in China and its spread outside China esp. to the US and European nations. India too has witnessed few cases though the number is small compared to China and other countries. The outbreak, if not contained at current levels, could lead a blow to global economy threatening consumption and tourism thereby risking business sentiments, globally.

The virus belongs to the family of viruses which cause illness like common cold to more severe ones like influenza, SARS, MERS etc. and happen to be prevalent in cold weather and the impact subsides/ virus becomes ineffective with rising temperature; nCov-19 is no different. As we approach summers, the effect of virus would recede and so will the negativity in the markets.

Historical data proves that during previous virus outbreaks, the markets had reacted on the similar lines as now but recovered swiftly as normalcy returned (Please refer next slide for the data). We feel that this time it would be no different unless the virus spreads fast and causes large scale human life destruction (on lines of Spanish Flu in 1918-19).

Looking at the situation as ‘glass half full’ (instead of glass-half-empty), we are of the opinion that Indian economy has higher benefits from the outbreak as it would force the global multinationals to look at redrawing their sourcing strategies / supply chains away from China; atleast they would look at tier 2 sources to ensure that any future supply side disruption (from China) does not impact their business prospects. India would be a big beneficiary of the change in business strategy as India offers low cost, educated labour force and good trade practices in form of regulation and IP rights to fill the vacuum created in the global supply chain, though the shift would happen over next couple of years.

In short term, the correction in crude would lead to low inflation, thus improving chances of lower interest rates in near future. Surplus supply in crude oil market is expected to keep prices low unless any supply disruption in form of production cuts by OPEC plus nations or geo-political tensions disrupt the supplies. Low crude prices would also help the companies using crude and crude derivatives as raw material for their products reduce their product prices leading to higher demand or improve margins.

Coordinated easing undertaken by central banks, to prevent conversion of the supply side shock created by the corona outbreak in China into a financial shock for various economies, has opened up opportunity for RBI to look at easing policy rates in India. RBI had been forced to ‘pause’ last time due to hardening inflation; correction in crude prices would help RBI MPC to look through the transient inflationary forces. We expect RBI to ease in forthcoming MPC meet in Apr.’20 which would augur well for interest rate sensitive sectors viz., banking, auto and auto ancillaries, real estate and housing finance etc.

We present few stocks which would be either beneficiaries of the developments due to corona virus outbreak or thereafter or those which have been corrected to reasonable valuations due to the concomitant market correction without any change in the underlying business or future prospects