Is it time to buy or sell stocks now?

I have invested a considerable amount in the stock market. Is it a wise decision to sell a part of it now as uncertainty in the market continues? P Sai Kiran, Hanamkonda

I hope you remember the global market crash during February 2020 and May 2020 due to the onset of the Covid-19 pandemic. The uncertainty amid coronavirus cast a shadow over stock markets across the world.

Stock market rout and freefall in global indices wiped out billions in value. As a result, many novice investors and first-time traders lost their fortunes due to the panic selling during the bloodbath in the stock markets. However, stock markets around the globe gradually recovered and rallied after the development of the vaccine. Eventually, stock markets have bounced back after the arrival of vaccines for commercial use, which was a great relief for the recovery of the global GDP and global economy. Last week, stock markets crashed amid growing geopolitical tensions and the Russia-Ukraine war crisis. Stocks of sectors and companies with direct exposure to Europe and Russia are at greater risk and understandably shaken by the ongoing crisis. As Dalal Street pressed the panic button, all the indices and shares were nosedived.

All investment classes, including equity, are associated with political risk. No person can predict, or no technical analysis can forecast, how long markets will continue to fall or how long it takes to recover during an uncertain political scenario. Panic selling during the market crash is not considered a winning strategy. Those who sell in panic will curse their own decision. With few exceptions, panic sellers may not re-enter the particular stocks or equity investments after selling in panic. These risk-averse investors may be tempted to buy at dips and low prices but keep postponing the decision or let it go due to fear of financial loss and reluctance to take risks. There is no straight answer to your question, as predicting the falling markets is not easy, especially during geopolitical conflict and War.

The impact, for some sectors, will last longer than expected. Some investors who are fearless and willing to take risks consider this time as an opportunity to buy shares during the falling market. Prices may slide even further, as no one can predict or tame the bearish markets. Many central banks, including the RBI and Federal Reserve, may increase interest rates to keep inflation in check. These decisions may further impact the capital markets. Servicing loans and higher borrowing costs may shrink the earnings of the companies. Do not panic, as long as the fundamentals of the stocks are optimistic and you have a long term horizon. Take help from a financial advisor if you still want to keep your losses minimal by selling off or investing in the falling markets.

I missed the last date for submitting investment proofs for tax savings, and my employer deducted additional tax in January. Can I do the investments in the month of March and take a refund? R V Prasad - Macherla

You should not be perpetually late concerning tax savings. Most employers are accommodating, and they still accept and consider the tax savings proofs from their employers after the deadline. Yes. You can invest till 31 March for the current financial year. After filing the IT returns for the respective assessment year, you can still get the refund. However, do not end up making hasty investment decisions only to become a victim of mis-selling.

You will be forced to invest in the wrong financial product due to your eleventh-hour shopping if tax saving instruments. It is difficult for employers and payroll to accept and consider savings and investments post February. Hence they may not accept the income tax proof submission after February. As a result, your tax savings will not reflect in the allowances and deductions part of your Form16 despite investing. Do not wait until March 2021 to invest in tax savings. There are many options for tax saving under section 80, such as tax-saving fixed deposits, premium paid on the life insurance and health insurance, public provident fund, national saving certificate, equity linked saving scheme, national pension system, unit linked insurance plans, school tuition fee and education loan.

(The author is a SEBI licensed Research Analyst. The alumnus of the Indian Institute of Foreign Trade (IIFT), he had held leadership roles at National Geographic, Reliance Radio Television Luxembourg, STAR TV, etc)