Surge in the stock market today was across markets globally. From US to Japan to India, markets witnessed an unexpected rally. Saudi Arabia and Russia are at loggerheads with respect to the daily output of oil, with no compromise in sight. Even this could not hold back the markets in the US. When Fed declared US$ 2.2 trillion stimulus, the markets did not respond.
So what then is the immediate cause of this global rally?
Indian businesses are optimistic about staggered removal of lockdown. Removal of export restrictions for Indian Pharma companies was also major factor.
Globally reducing cases of infection and deaths in Europe & US are bringing confidence in investors.
At the same time, there are few other factors which cannot be missed. The effect of lockdown and social distancing has not hit declared financial results of companies yet. It will happen when Q4 of FY20 and Q1 of FY21 would be declared. Job losses, layoffs, loss of domestic remittances from Indian Metros to Rural India (Bharat) may show its effect in a few months. But there are some inherent strengths in the Indian Economy and this will help us tide over this situation certainly but that in itself may not be enough to gauge the movement or direction of the stock market today…
Present rally may be because of optimism due to above reasons or it may be simply following principle ‘Buy at first sign of receding virus infection’. In short Fear of Missing out on the Opportunity!
Investment theories are always right or wrong in hindsight. The only logical way to invest is to deploy your capital as a fixed percentage at fixed time intervals over a wide-enough time window to capture the market movement regardless of it’s movement. Volatility in the markets becomes your best friend with this kind of staggered approach.
Be careful, do your research about fundamentals before investing and follow the SIP route as per your risk appetite and in sync with your goals.