LV InsightsNavigating COVID-19

Invest cautiously – writing cheques in a downturn

Downturns are a part of the economic cycle. Time and again, the economy takes a hit, and subsequently, markets crash, liquidity shrinks, and bear markets evolve. But, downturns become a boon in disguise for investors who play their cards right. Effective investing during a downturn can result in smaller losses, leaving more capital for investors to reinvest at lower prices and make larger profits in the long term. An investor, however, needs to analyze market trends granularly; while certain verticals struggle to survive, there are verticals that might actually scale-up. The trends in the market during the current COVID-19 economic slowdown are no different.

Sanjeev Bhikchandani, Founder of InfoEdge, said during his keynote session on LetsVenture’s online angel investing masterclass, “Frugal entrepreneurs will survive the downturn and might even come out strong. These are the companies that investors need to find and invest in.” On a similar note, Sharad Sharma, Co-founder of iSPIRT said, “Downturns lead to strategic clarity. Most startups, in this time frame, identify and solve the most critical problems.”

But it is also important for an investor to identify the verticals that would experience massive disruption. Ashish Gupta, one of the first angel investors in Flipkart, MuSigma & MakeMyTrip back in the 2008-10 timeframe says, “The present COVID situation will push people to use remote applications. Therefore, innovations around AR/VR might see an acceleration. Also, look out for the sectors of telemedicine and disaster recovery in healthcare. Invest in verticals that will get disrupted.”

Watch this video for more inputs on investing in a downturn: 

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