Nifty and Bear Markets

Whenever market corrects, one fears it may be the start of yet another bear market and this fear is largely due to historical experiences of those bear markets which literally took investors and even traders to the washers. A bear market is depressing in more days than one since its said that the pain of a loss is always greater than the happiness of a win and a bear market is one such painful process.

The general definition of a bear market is of either a 20% drop from the top or the break of the 200 day Moving Average. But these definitions suffer from fact that even deep corrections are mislabeled as a bear market when its actually just markets being a bit more volatile than normal.

Another definition of a bear market which seems to adjust for corrections comes from Ned Davis Research, a firm that is able to crunch and plot data in ways one did not even thought is possible. Their definition is that a market is considered as having entered a bear phase if it is down greater than 13% after 145 days from day of last high. 145 trading days equates to around 6 months of calendar days.

Based on above definition and taking data from 1990 on wards, Nifty 50 has seen 9 Bear Markets with 10 being underway currently. Below is the table that lists the same

How to read the above table

Start -> Start of this leg (Day after the last new High)

Max D/D -> Maximum Drawdown seen in the fall

Max Date -> Date of the Maximum Drawdown

Days to Max -> Trading days it took to go from 0 to Max D/D

Days to NH – > Days it took for the D/D to travel from 0 (previous high) to 0 (New High)