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Taking advantage of Market Correction due to COVID-19

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Dear friends,

 

We hope all of you are safe and in good health. These are unprecedented times and as a long term investor we can buy quality stocks at extremely cheap valuations during this market correction. Such market corrections are not at all common and happen once in 3-5 years, when a large basket of good stocks is available at 25-30% discount of their current market value. I will be keeping this article extremely short and to the point, to save the valuable time of the investors.

 

We have divided this article into 4 different sections, each one pertaining to a very specific investor category, these categories of investors  are:

  1. Aggressive stock investors

  2. People looking for steady rental income

  3. Passive investors

  4. Investors looking for international market exposure

Irrespective of which category you belong to (you can have an appetite to have a mix of all these categories), our advise would be to stagger your investments into the market. Do not put all your money into a single stock, and also not enter at a single point in time. Divide your money into multiple good stocks/investment-vehicles and stagger it across time horizon. 

That being said, lets jump directly into the stocks an investor should look at.

Aggressive investor:

Investors in this category have experience with direct stock market investments. Some of the stocks which have significantly corrected and should be looked upon are:

  • Nestle

  • Britannia

  • P&G health and hygiene

  • L&T

  • Bajaj Finance

  • Bajaj auto

  • SBI

  • ITC

Some of the other stocks which investors should keep a watch at and purchase if they further fall by 15-20% are:

  • Affle india

  • IRCTC

  • Avenue supermarts

These stocks are being looked at given they have distinct competitive advantage/moat and significant brand strength. They have withered the test of time, maintain healthy operations and have deep market penetration. These are the brands which will sustain the on-going turmoil and will provide a good return on investment over a period of 1-2 years.

People looking for steady income stream:​

Since the launch of Embassy office REIT, Indian investors have finally got a quality option to invest in rental income generating assets. This REIT offers not only a good rental income yield, but also capital appreciation (to know more, check out this article). Embassy REIT has corrected from a price of INR 470+ (vs. issue price of INR 300) to INR 356 currently. This has made this investment vehicle extremely lucrative for investors looking for a steady income stream.

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Passive investors ​

Even if directly investing into stock market through demat account is not your cup of tea, you can still own a basket of carefully picked stocks through a mutual fund. For the current market correction, we have researched 10+ mutual funds, have looked at each and every company they invest in and have shortlisted following 2 funds:

  1. Axis bluechip direct growth fund

  2. UTI MNC direct growth fund

The Axis blue chip fund is well diversified fund and is heavy on financing institutions, versus UTI MNC fund which is heavy on FMCG sector. The overlap between the 2 funds is also on the lower side thus giving good diversification to the investors. We also like the individual companies these funds invests into, and the historical performance of these funds.

Investors looking for international market exposure

The markets along the globe have sharply corrected, especially in South East Asian Countries (also known as ASEAN nations). We have carefully curated a the below list of mutual funds which invests in the blue chip stocks of markets around the world:

  1. Edelweiss ASEAN equity off shore direct growth

  2. Nippon India US equity Opportunities fund direct growth

  3. Edelweiss Europe Dynamic Equity Offshore fund direct growth

  4. Edelweiss Greater China Equity Offshore fund direct growth

A brief about these funds is given hereafter. 

Edelweiss ASEAN equity off shore direct growth: Focussed primarily on financial institutions of ASEAN nations, given these nations have vibrant economies, and they lie on the international trade route, the financial institutions of these countries are really strong. Some of the top holding companies in portfolio are: DBS bank,Bank Central Asia, Overseas Chinese bank, Rakayat Indonesian bank, Malaysian banking, Singapore telecommunications etc. 

Nippon India US equity Opportunities fund direct growth: This fund is focussed on US IT giants, you will find companies like Alphabet, Microsoft, Amazon, Facebook in this fund. 

Edelweiss Europe Dynamic Equity Offshore fund direct growth: This fund is focussed on Europe's manufacturing sector, companies specifically in automobile , farm equipment and agricultural chemicals manufacturing/exports.

Edelweiss Greater China Equity Offshore fund direct growth: This fund is focussed on China & Hong-kong area majorly, and has top holdings in firms like Baidu (Chinese search giant) and Tencent (gaming company).

Happy investing :) and stay safe.

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