I analyzed 25+ years of #Nifty data to better understand bear markets 🐻

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 🧵👇
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 🐻

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

2/n
🇮🇳 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 – 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
Bull Markets 🐂 have Bear Phases 🐻

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 🇮🇳 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 🇮🇳👇

12/n
Bear Market Summary

1. 🐻 occurs every ~3 years and avg 8 months to bottom

2. 🇮🇳 has only seen 2 bear markets in last 9 years

3. 🐻 recoveries take double the time (16 months)

4. Bull 🐂 markets can have multiple 🐻 phases

5. Increase equity allocation on 15%+ declines

END

More from Trading

12 TRADING SETUPS used by professional traders:🧵

Collaborated with @niki_poojary

Here's what you'll learn in this thread:

1. Capture Overnight Theta Decay
2. Trading Opening Range Breakouts
3. Reversal Trading Setups
4. Selling strangles and straddles in Bank Nifty
6. NR4 + IB
7. NR 21-Vwap Strategy

Let's dive in ↓

1/ STBT option Selling (Positional Setup):

The setup uses price action to sell options for overnight theta decay.

Check Bank Nifty at 3:15 everyday.

Sell directional credit spreads with capped


@jigspatel1988 2/ Selling Strangles in Bank Nifty based on Open Interest Data

Don't trade till 9:45 Am.

Identify the highest OI on puts and calls.

Check combined premium and put a stop on individual


@jigspatel1988 3/ Open Drive (Intraday)

This is an opening range breakout setup with a few conditions.

To be used when the market opens above yesterday's day high

or Below yesterday's day's

You May Also Like

And here they are...

THE WINNERS OF THE 24 HOUR STARTUP CHALLENGE

Remember, this money is just fun. If you launched a product (or even attempted a launch) - you did something worth MUCH more than $1,000.

#24hrstartup

The winners 👇

#10

Lattes For Change - Skip a latte and save a life.

https://t.co/M75RAirZzs

@frantzfries built a platform where you can see how skipping your morning latte could do for the world.

A great product for a great cause.

Congrats Chris on winning $250!


#9

Instaland - Create amazing landing pages for your followers.

https://t.co/5KkveJTAsy

A team project! @bpmct and @BaileyPumfleet built a tool for social media influencers to create simple "swipe up" landing pages for followers.

Really impressive for 24 hours. Congrats!


#8

SayHenlo - Chat without distractions

https://t.co/og0B7gmkW6

Built by @DaltonEdwards, it's a platform for combatting conversation overload. This product was also coded exclusively from an iPad 😲

Dalton is a beast. I'm so excited he placed in the top 10.


#7

CoderStory - Learn to code from developers across the globe!

https://t.co/86Ay6nF4AY

Built by @jesswallaceuk, the project is focused on highlighting the experience of developers and people learning to code.

I wish this existed when I learned to code! Congrats on $250!!