Investors often panic and sell their investments when the market drops, fearing more losses. But history shows that bear markets usually bounce back, offering great chances for long-term investors to buy good assets at lower prices. In India, past bear markets have taught us that staying invested or buying more during downturns can build wealth over time.
 | Bear Market: 1994 – 1999 The Sensex dropped from 4588 points to 2890 points. Few of the reasons: ▪ Weak Coalition Government under Mr. P. V. Narasimha Rao. ▪ Protests to the liberalisation policies by opposition. ▪ Unemployment and High Inflation. Market jumps to new high: 5447 points ▪ The liberalisation reforms started to pay off. ▪ The IT sector fuels the economic growth. |
 | Bear Market: 2000 – 2003 Post 2000 the Sensex dropped from 5447 points to 2800 points, a slow painful phase for 3 years. Few of the reasons: ▪ Global dot.com bubble burst. ▪ Ketan Parekh Scam ▪ 9/11 attacks Market jumps to new high: 5839 points ▪ IT sector growth bouncing back. ▪ FIIs flows resumes. |
Disclaimer:
Mutual Funds are subject to market risk. Please read the offer document before investing. Please consult with your financial advisor before you act on the above views.
 | Bull (2003 – 07) & Bear (2007 – 09): A period of historic bull run in Indian equity market. The market raced from 5447 points to 20287 points. The strong market reflected India’s economic growth story. ▪ India’s GDP consistently grew at an annual rate of 8-9% on strong economic reforms. ▪ Higher per capita led to consumption boom. ▪ Robust corporate earning’s growth. ▪ Surge in FII inflow ▪ Global bull market. The global financial crisis (collapse of Lehman Brothers, triggered a massive global melt down of the equity market) with Sensex tanking 56%. |
 | Bear Market: 2010 – 2011 ▪ The European sovereign debt crisis. ▪ High Inflation ▪ The policy Paralysis in India led to the 25% decline in the equity market. The bear market lasted for 12 months, before it picked up. Economic reforms and stable government policies led to the revival and handsome gain in the market. |
 | Bear Market: 2015 – 2016 ▪ China’s slowdown and Yuan devaluation. ▪ Rise in US Interest rates ▪ Brexit Concerns Pulled down the market by 22% over 12 months. The stock market recovered on account of multiple factors: ▪ Revival in global sentiment as crude oil prices stabilizes. ▪ FII inflows ▪ Domestic reforms: ▪ Insolvency and Bankruptcy Code (IBC) and GST gained traction. ▪ Strong RBI monetary policy and improving economic indicators. |
Disclaimer:
Mutual Funds are subject to market risk. Please read the offer document before investing. Please consult with your financial advisor before you act on the above views.
The COVID-19 crash (from 41,000 to 26,000), for example, was quick. Global central banks responded with easy monetary policies, and as economies reopened, stock markets surged due to extra liquidity.
Recently, the large-cap index fell over 12% in six months, with mid and small caps hit harder. Several global and local factors caused this decline.
| Global Factors: ▪ US tariff related uncertainties. ▪ Tightening Monetary Policies. ▪ Fears of global recessions. ▪ Geo-political tensions. | Domestic factors: ▪ Weakening corporate earnings. ▪ Concerns over high valuations. ▪ Foreign Portfolio Outflows. |
Conclusion:
There may be headwinds leading to the fall in the Indian Equity market. India is resilient enough to weather these short term set-backs storms. Structurally the long term India growth story remains strong.
Despite challenges, India’s economy is strong enough to handle short-term market drops. Over the past 30 years, there have been fewer bear markets than bull markets, and bear markets don’t last as long. It’s tough to time the market perfectly when it’s at its lowest point because markets react to news ahead of time. By the time the bad news clears up, the market may have already risen. Bear markets can actually be helpful. Trying too hard to find the perfect moment can lead to poor results. Accepting short-term issues can create wealth if the long-term outlook is positive.
Learnings of the bear market:
- Bear markets are blessings in disguise.
- Chasing perfections leads to poor outcomes.
- Accepting short term imperfections, creates the perfect investment moments.
Article authored by
Tanwir Alam
Founder & CEO
FINCART
Disclaimer:
Mutual Funds are subject to market risk. Please read the offer document before investing. Please consult with your financial advisor before you act on the above views.
