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Top TSX Stocks I’m Watching Amid the Market Crash 2.0

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On Monday, the market traded on a negative note as the S&P/TSX Composite Index fell by nearly 2%. The Canadian market benchmark has fallen by 6.9% in 2020, with about 3.8% losses in September. I warned investors on the very first day when the stocks started falling on September 3.

Nonetheless, the ongoing market crash could give a buying opportunity in many great TSX stocks — I believe. Before we talk about a stock, I’m keeping a close eye on during the ongoing broader market sell-off — let’s quickly look at the worst-performing Canadian sectors this week.

Worst-performing sectors

Unlike the market sell-off earlier this month, the Monday crash wasn’t driven by the technology sector. In fact, tech stock under the TSX Composite benchmark rose by 0.8% on September 21. Instead, academic and education services, healthcare, basic materials, and consumer cyclical were among the worst-performing industries this week.

The shares of First Majestic Silver Corp, Hudbay Minerals, First Quantum Minerals, and Vermilion Energy tanked by nearly 9% yesterday. Due to a sell-off in airline stock across North America, Air Canada stock also lost more than 8% for the day as airline industry investors remain worried about the second wave of the pandemic.

Market crash

1 top TSX stock to watch during the market crash

In the last five days, the shares of Royal Bank of Canada (TSX: RY)(NYSE: RY) have lost 5.3%. On a year-to-date basis, the stock is down by 10.5% compared to a 6.3% decline in the TSX Composite Index.

While bank stocks are not among my favourite stocks to buy list right now, I would want to keep a close eye on large banks during the ongoing market crash — mainly to find a buying opportunity if they fall much lower than their fair value.

Expectations of a gradual recovery in their core banking operations — mainly due to easing COVID-19 related restrictions — could boost bank investors’ sentiments in the coming quarters.

Lower dividends than peers

Royal Bank of Canada currently offers a 4.6% dividend yield – slightly lower than many of its peers. Toronto-Dominion Bank’s and Canadian Imperial Bank of Commerce’s dividend yield is at 5.2% and 5.7%, respectively.

I still find the Royal Bank of Canada stock more attractive than other large bank stocks. Its stable fundamentals — along with its continued focus on digitalization — make me more optimistic about RBC’s future.

If we look at the 10-year return of major Canadian banks, the Royal Bank of Canada has outperformed its peers. Its stock has yielded nearly 80% return in the last 10 years, while the shares of TD Bank and CIBC have risen by 64% and 39%, respectively.

Foolish takeaway

As I’ve mentioned in some of my recent articles, bank stocks might continue to face tough times as the ongoing pandemic has devastated their core banking operations. Also, a weak economic outlook could add to banks’ worries in the near to medium term. These are the reasons I don’t want to buy any bank stocks for the short-term.

But if the ongoing sell-off allows me to buy a great dividend stock like Royal Bank of Canada really cheap, I’d definitely consider adding it to my portfolio and hold it for the long term.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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