Read on Twitter
I analyzed 25+ years of #Nifty data to better understand bear markets 
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐻" title="Berengezicht" aria-label="Emoji: Berengezicht">
Why?
Given the recent market sell-off and bearish stance of market participants, history and data is your best guide to prepare if we& #39;re headed for a bear market.
Thread with findings belowhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="🧵" title="collectie" aria-label="Emoji: collectie">https://abs.twimg.com/emoji/v2/... draggable="false" alt="👇" title="Rug van hand met omlaag wijzende wijsvinger" aria-label="Emoji: Rug van hand met omlaag wijzende wijsvinger">
1/n
Why?
Given the recent market sell-off and bearish stance of market participants, history and data is your best guide to prepare if we& #39;re headed for a bear market.
Thread with findings below
1/n
Why?Given the recent market sell-off and bearish stance of market participants, history and data is your best guide to prepare if we& #39;re headed for a bear market.Thread with findings below https://abs.twimg.com/emoji/v2/... draggable="false" alt="🧵" title="collectie" aria-label="Emoji: collectie">https://abs.twimg.com/emoji/v2/... draggable="false" alt="👇" title="Rug van hand met omlaag wijzende wijsvinger" aria-label="Emoji: Rug van hand met omlaag wijzende wijsvinger">1/n" title="I analyzed 25+ years of #Nifty data to better understand bear markets https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐻" title="Berengezicht" aria-label="Emoji: Berengezicht">Why?Given the recent market sell-off and bearish stance of market participants, history and data is your best guide to prepare if we& #39;re headed for a bear market.Thread with findings below https://abs.twimg.com/emoji/v2/... draggable="false" alt="🧵" title="collectie" aria-label="Emoji: collectie">https://abs.twimg.com/emoji/v2/... draggable="false" alt="👇" title="Rug van hand met omlaag wijzende wijsvinger" aria-label="Emoji: Rug van hand met omlaag wijzende wijsvinger">1/n" class="img-responsive" style="max-width:100%;"/>
But first, do you know the definition of a bear market?
When any index falls 20% or more from it& #39;s all time high, it is termed to be in a #bearmarkethttps://abs.twimg.com/emoji/v2/... draggable="false" alt="🐻" title="Berengezicht" aria-label="Emoji: Berengezicht">
How do you calculate length of a bear market? The time duration in days from previous all-time high to market bottom.
2/n
When any index falls 20% or more from it& #39;s all time high, it is termed to be in a #bearmarket
How do you calculate length of a bear market? The time duration in days from previous all-time high to market bottom.
2/n
How do you calculate length of a bear market? The time duration in days from previous all-time high to market bottom. 2/n" title="But first, do you know the definition of a bear market?When any index falls 20% or more from it& #39;s all time high, it is termed to be in a #bearmarket https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐻" title="Berengezicht" aria-label="Emoji: Berengezicht">How do you calculate length of a bear market? The time duration in days from previous all-time high to market bottom. 2/n" class="img-responsive" style="max-width:100%;"/>
Number of Bear Markets = 8
Average drawdown % = -38.5%
Average bear market duration = 246 days (8 m)
Key takeaway - Bear markets occur every ~3 years and take on average 8 months to bottom
3/n
Nifty last 25 years (1997-2022*)Number of Bear Markets = 8Average drawdown % = -38.5% Average bear market duration = 246 days (8 m) Key takeaway - Bear markets occur every ~3 years and take on average 8 months to bottom3/n" title="https://abs.twimg.com/emoji/v2/... draggable="false" alt="🇮🇳" title="Vlag van India" aria-label="Emoji: Vlag van India"> Nifty last 25 years (1997-2022*)Number of Bear Markets = 8Average drawdown % = -38.5% Average bear market duration = 246 days (8 m) Key takeaway - Bear markets occur every ~3 years and take on average 8 months to bottom3/n" class="img-responsive" style="max-width:100%;"/>
1997 and 2006 saw the fastest bear markets with Nifty correcting 20-30% in just ~1 month.
Unbelievably, 1997 had 2 bear markets! Just imagine suffering 20% drawdowns twice in a few months!
Mar 2020 Covid crash was the 3rd fastest and 3rd worst bear market.
4/n
Unbelievably, 1997 had 2 bear markets! Just imagine suffering 20% drawdowns twice in a few months!
Mar 2020 Covid crash was the 3rd fastest and 3rd worst bear market.
4/n
Okay, how should we define Bear Market Recovery?
The no of days from market bottom to a new all-time high.
Sadly, bear markets take time to recover.
Almost double the time to recover to a new ATH compared to the time to form a bottom.
Avg recovery duration – 495 days
5/n
The no of days from market bottom to a new all-time high.
Sadly, bear markets take time to recover.
Almost double the time to recover to a new ATH compared to the time to form a bottom.
Avg recovery duration – 495 days
5/n
Every cloud has a silver lining.
495 days or 16 months is the avg bear market recovery duration but they have been as short as 78 days (1997) or 138 days (2006).
5 out of 8 bear markets recovered within 8 months
Takeaway – Most bear markets recover within a year
6/n
495 days or 16 months is the avg bear market recovery duration but they have been as short as 78 days (1997) or 138 days (2006).
5 out of 8 bear markets recovered within 8 months
Takeaway – Most bear markets recover within a year
6/n
Bull Markets https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐂" title="Os" aria-label="Emoji: Os"> have Bear Phases https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐻" title="Berengezicht" aria-label="Emoji: Berengezicht">
We have all heard about 2003-07 bull market.
Nifty went ~7x in 5 years
April 2003 - 920
Jan 2008 - 6357
But even one of India& #39;s biggest bull markets had 2 bear markets in 2004 and 2006.
Bull markets never go up in a straight line.
7/n
We have all heard about 2003-07 bull market.
Nifty went ~7x in 5 years
April 2003 - 920
Jan 2008 - 6357
But even one of India& #39;s biggest bull markets had 2 bear markets in 2004 and 2006.
Bull markets never go up in a straight line.
7/n
have Bear Phases https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐻" title="Berengezicht" aria-label="Emoji: Berengezicht">We have all heard about 2003-07 bull market. Nifty went ~7x in 5 years April 2003 - 920Jan 2008 - 6357But even one of India& #39;s biggest bull markets had 2 bear markets in 2004 and 2006. Bull markets never go up in a straight line.7/n" title="Bull Markets https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐂" title="Os" aria-label="Emoji: Os"> have Bear Phases https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐻" title="Berengezicht" aria-label="Emoji: Berengezicht">We have all heard about 2003-07 bull market. Nifty went ~7x in 5 years April 2003 - 920Jan 2008 - 6357But even one of India& #39;s biggest bull markets had 2 bear markets in 2004 and 2006. Bull markets never go up in a straight line.7/n" class="img-responsive" style="max-width:100%;"/>
Key Question - So do you need to wait ~3 years for a bear market to buy equities?
The answer to this question has gradually changed in the past 25 years.
Between 1997-2013, the market was in bear market territory every single year barring just 2 years.
8/n
The answer to this question has gradually changed in the past 25 years.
Between 1997-2013, the market was in bear market territory every single year barring just 2 years.
8/n
You will hardly believe the next insight given how strong India& #39;s markets have been in the recent past.
But in a span of 17 years between 1997-2013, our markets spent close to ~50% time in bear market (20%+ decline) territory.
9/n
But in a span of 17 years between 1997-2013, our markets spent close to ~50% time in bear market (20%+ decline) territory.
9/n
However, since 2013 https://abs.twimg.com/emoji/v2/... draggable="false" alt="🇮🇳" title="Vlag van India" aria-label="Emoji: Vlag van India"> markets have been extremely resilient with just 2 bear markets in 9 years.
Complete opposite to above chart, Nifty has spent 50% time in last 9 years near ATHs.
And spent just 4% time in bear market territory
10/n
Complete opposite to above chart, Nifty has spent 50% time in last 9 years near ATHs.
And spent just 4% time in bear market territory
10/n
markets have been extremely resilient with just 2 bear markets in 9 years. Complete opposite to above chart, Nifty has spent 50% time in last 9 years near ATHs. And spent just 4% time in bear market territory10/n" title="However, since 2013 https://abs.twimg.com/emoji/v2/... draggable="false" alt="🇮🇳" title="Vlag van India" aria-label="Emoji: Vlag van India"> markets have been extremely resilient with just 2 bear markets in 9 years. Complete opposite to above chart, Nifty has spent 50% time in last 9 years near ATHs. And spent just 4% time in bear market territory10/n" class="img-responsive" style="max-width:100%;"/>
In the last 8.5 years, markets have corrected ~15% every other year and I cannot predict if the 25-30% frequent drawdowns between 1997-2013 will become the norm anytime soon.
So, 15%+ declines from ATH can be used as a good metric to increase equity allocation in my view.
11/n
So, 15%+ declines from ATH can be used as a good metric to increase equity allocation in my view.
11/n
This thread took me 15+ hours of research and writing, so please retweet if you find it useful.
I will create a separate thread for bear markets in small caps if this thread gets enough traction.
Summary and Learnings of last 25 years of Bear Markets inhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="🇮🇳" title="Vlag van India" aria-label="Emoji: Vlag van India">https://abs.twimg.com/emoji/v2/... draggable="false" alt="👇" title="Rug van hand met omlaag wijzende wijsvinger" aria-label="Emoji: Rug van hand met omlaag wijzende wijsvinger">
12/n
I will create a separate thread for bear markets in small caps if this thread gets enough traction.
Summary and Learnings of last 25 years of Bear Markets in
12/n
Bear Market Summary
1.https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐻" title="Berengezicht" aria-label="Emoji: Berengezicht"> occurs every ~3 years and avg 8 months to bottom
2.https://abs.twimg.com/emoji/v2/... draggable="false" alt="🇮🇳" title="Vlag van India" aria-label="Emoji: Vlag van India"> has only seen 2 bear markets in last 9 years
3.https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐻" title="Berengezicht" aria-label="Emoji: Berengezicht"> recoveries take double the time (16 months)
4. Bullhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="🐂" title="Os" aria-label="Emoji: Os"> markets can have multiple https://abs.twimg.com/emoji/v2/... draggable="false" alt="🐻" title="Berengezicht" aria-label="Emoji: Berengezicht"> phases
5. Increase equity allocation on 15%+ declines
END
1.
2.
3.
4. Bull
5. Increase equity allocation on 15%+ declines
END
