I analyzed 25+ years of #Nifty data to better understand bear markets ๐Ÿป

Why?

Given the recent market sell-off and bearish stance of market participants, history and data is your best guide to prepare if we're headed for a bear market.

Thread with findings below ๐Ÿงต๐Ÿ‘‡
1/n

But first, do you know the definition of a bear market?

When any index falls 20% or more from it's all time high, it is termed to be in a #bearmarket ๐Ÿป

How do you calculate length of a bear market? The time duration in days from previous all-time high to market bottom.

2/n
๐Ÿ‡ฎ๐Ÿ‡ณ Nifty last 25 years (1997-2022*)

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
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
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 โ€“ 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 โ€“ Most bear markets recover within a year
6/n
Bull Markets ๐Ÿ‚ have Bear Phases ๐Ÿป

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's biggest bull markets had 2 bear markets in 2004 and 2006.

Bull markets never go up in a straight line.

7/n
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
You will hardly believe the next insight given how strong India'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
However, since 2013 ๐Ÿ‡ฎ๐Ÿ‡ณ 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
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
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 in ๐Ÿ‡ฎ๐Ÿ‡ณ๐Ÿ‘‡

12/n
Bear Market Summary

1. ๐Ÿป occurs every ~3 years and avg 8 months to bottom

2. ๐Ÿ‡ฎ๐Ÿ‡ณ has only seen 2 bear markets in last 9 years

3. ๐Ÿป recoveries take double the time (16 months)

4. Bull ๐Ÿ‚ markets can have multiple ๐Ÿป phases

5. Increase equity allocation on 15%+ declines

END

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Following @BAUDEGS I have experienced hateful and propagandist tweets time after time. I have been shocked that an academic community would be so reckless with their publications. So I did some research.
The question is:
Is this an official account for Bahcesehir Uni (Bau)?


Bahcesehir Uni, BAU has an official website
https://t.co/ztzX6uj34V which links to their social media, leading to their Twitter account @Bahcesehir

BAUโ€™s official Twitter account


BAU has many departments, which all have separate accounts. Nowhere among them did I find @BAUDEGS
@BAUOrganization @ApplyBAU @adayBAU @BAUAlumniCenter @bahcesehirfbe @baufens @CyprusBau @bauiisbf @bauglobal @bahcesehirebe @BAUintBatumi @BAUiletisim @BAUSaglik @bauebf @TIPBAU

Nowhere among them was @BAUDEGS to find