Covid-19 virus outbreak is a serious pandemic of unforeseen proportions which led to a major sell-off in global markets in February. Although the World Health Organization said that the epidemic has peaked in China, its spread accelerating in other countries continued to keep investors on edge.

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"No one knows how far the fear over the Covid-19 virus will extend and to what extent stocks will fall further. Till the time the Covid-19 virus was contained in mainland China, there was compliancy in global equity markets but now as more cases are getting reported in various countries the impact is sharper," a CII report said.

Even though the Indian equities outperformed global peers through this coronavirus scare, the benchmarks have still declined over 6 percent in the last 1 month. Despite the coronavirus scare and the steep decline in markets, Kotak Securities said that it's one year Nifty-50 target ranges between 13,000-13,500.

Nifty-50 has already corrected by 10 percent from its peak. On a conservative basis, the downside of 10,500 and upside of 13,000 provides a potential downside of 6 percent and a potential upside of 16 percent, it added.

The risk-reward ratio of downside to the upside at 1:3 has turned favourable. It is ideal to accumulate stocks from current levels since the risk-reward ratio is in favour of equities. The lower bond yields will support higher valuations for equities, which is a big factor in favour of equities.

Kotak Securities further noted that the markets are expected to remain weak till the time the number of cases reported globally either stabilises or goes down. Based on past precedencies the recovery in markets (post containment of such epidemics) is equal or higher than the fall, it added.

Till date, India has seen the least impact of the Covid-19 virus which could work in its favour as far as flows are concerned. To address the near term headwinds due to the Covid-19 virus and a potential slowdown in FY21 GDP numbers, investors can also expect some measures from the Indian government and RBI in the coming times, Kotak further said.

For India, SIP flows could act as a buffer in times when FIIs withdraw their investments. Based on valuations it expects the Nifty-50 to take support anywhere between 10,500-11,000.

Interest in mid and small caps had revived before the budget but they too have corrected sharply in the recent correction, the report noted, adding that the broader markets may take a backseat for some time till clarity emerges on the broader Nifty-50 Index.

In the course of CY20, the brokerage expects mean reversion to allow mid and small caps to catch up on their last two years underperformance vis-à-vis Nifty-50 Index and recommends investors to look for companies with good earnings growth prospect and available at beaten-down prices with reasonable valuations.