Panic selling on the back of widespread of the novel Coronavirus (COVID-19) along with certain fundamental concerns in the economy led to the crash in the markets on Friday with the Nifty hitting the lower circuit for the first time. What is required, right now, is a ban on short-selling in the markets.
The regulator has already lost a lot of time, and further delay will only lead to a market crisis. I would, humbly, request the Securities and Exchange Board of India (Sebi) to ban short-selling just the way China did. We need to learn from China, the way it handled the crisis. The Chinese regulators banned short-selling even before the markets resumed trading post the Lunar New Year holiday. This ban would reduce the speculative hammering of the stocks and thereby, to some extent, it would help in stabilising the markets. Besides, China took aggressive measures to contain the spread of the virus. And look at the result. China is, relatively, the best-performing country in the global market crash.
So, what should investors do now?
I think it’s too late to generate cash now. Whosoever is asking investors to sell is not giving a correct advice. Investors should stay put in fundamentally sound businesses. Barring aviation, cinema and hotel stocks, which might be affected due to a lockdown, investors should look for strong fundamentals, low debt, and sound balance sheets before taking an investment decision.
G Chokkalingam is founder and managing director at Equinomics Research. Views are his own.
(As told to Nikita Vashisht)