Coronavirus situation could take 12 months to get under control, says Marcellus Investment Managers

The situation caused by coronavirus globally could take as long as 12 months to come under control as that is the estimated time which would be required to develop a vaccine, said Pramod Gubbi, co-founder, Marcellus Investment Managers.

“Rather than looking at whether it is two months or four months, our sense is you can clearly say six months from now or perhaps 12 months from now, we would be looking at a coronavirus situation where it is broadly under control, perhaps getting closer to a vaccine for COVID-19 -- potentially a cure and hence we should clearly in our minds think that this is not a doom’s day scenario, things (in the stock market) can come back," said Gubbi in an interview with CNBC-TV18.

"If the fundamental value is defined by long-term cashflows and if the conclusion is that the long-term is going to be alright, this is a great buying opportunity," he added.

Comparing the current situation with the 2008 global financial crisis, Gubbi said, “If you compare it to the 2008 crisis, the reaction from the governments and the central banks have been far swifter. Perhaps, having learnt from that experience, the amount of liquidity that has been committed by the central banks -- almost USD 6 trillion and still counting -- and the fiscal stimulus which has come in double quick time from the western economies –- north of USD 2 trillion -- could arrest the possible impact on the economy. I wouldn’t say that there wouldn’t be any further lows because in the short-term, stock prices are driven by sentiment as well."

Talking about investing in the telecom sector, he said, “Unless and until we see a structural change in the telecom industry structure, where returns on capital can come back to healthy levels, it doesn’t meet our investment criteria and we tend to stay away from it."

“We have three healthcare stocks and a couple of fast moving consumer goods (FMCG) stocks in our portfolio,” he further added.