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. 

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: 

1. Bear markets are blessings in disguise. 

2. Chasing perfections leads to poor outcomes.  

3. 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.