In times of extreme market volatility and high risk aversion indiscriminate selling takes place for multiple reasons. For instance, traders may have to raise capital to meet margin calls by selling their most liquid holdings. Other investors may become so risk averse that they exit holdings even after recording hefty losses in a short period. Add to that the general uncertainty surrounding the economic impact of Covid-19 on corporate profits, and I see this as an opportunity to exploit the unwarranted risk premium embedded in valuations of lowly rated well-financed companies with a view to realising material medium-term upside in due course.
Cash in on a free ride