Investment made in 9 out of 10 crises gave double-digit returns: HDFC MF
1 min read.Updated: 15 Jul 2020, 01:19 PM ISTAvneet Kaur
HDFC Mutual Fund believes the time is right to increase exposure to equities with a medim to long term view
10 year NIFTY returns at 5% CAGR has happened after 15 years
Historically, investments made in uncertain times have yielded good returns, says a report ‘COVID-19, Lockdown, Oil & More’ by HDFC Mutual Fund. The report says, “ Investment made in 9 out of 10 major crises over the last 20 years, have yielded double digit returns over the next one year."
HDFC Mutual Fund supported the claim by showing ‘next one year’ returns of 10 crises that have happened in the past including, Asian Financial Crisis, Kargil War, Attack on World trade Center in the US, SARS Outbreak, Iraq war, BJP unexpectedly losing election, Global Financial Crisis, European Debt crisis, Taper tantrum and BREXIT announcement. (See the table)
Covid19, once in a lifetime event
The report further adds that COVID19 is a once in a lifetime event and has resulted in severe temporary stress. However, the impact of one such year on intrinsic value of businesses is minimal.
“Like in the past, the world should limp back to normalcy and neither COVID19 nor lockdown should be making headlines after some time. Markets tend to over-react to crises in the near term leading to sharp corrections," says the report by HDFC Mutual Fund.
According to the data shown in the HDFC Mutual Fund’s report, 10 year NIFTY returns are at 5% CAGR currently. This has happened after 15 years. Historically, NIFTY returns below 5% CAGR over a 10 year period have been followed by good returns over next 3, 5 and 10 years. (See the table)
Increase exposure to equities
HDFC Mutual Fund believes the time is right to increase exposure to equities with a medim to long term view.
“In our opinion, current markets offer a good opportunity for the discerning investor. It would be advisable to increase exposure to equities and stay invested with a medium to long term view," says the report.