Bear Market

Investments

A bear market is a sustained decline of 20% or more in stock prices from recent highs. In India, Nifty 50 has experienced several bear markets -- 2000-2001 (dot-com), 2008-2009 (financial crisis, -60%), 2011, 2015-16, 2020 (COVID, -38%). Bear markets are temporary; they have always been followed by recovery.

In detail

Historical Indian bear markets:n2008: Nifty fell from 6,288 to 2,524 (-60%). Recovery to new highs: 4 yearsn2020 COVID: Nifty fell from 12,362 to 7,511 (-38%). Recovery: 6 monthsn2015-16: Nifty fell 26%. Recovery: 18 monthsnnBear markets are the best time for SIP investors -- same Rs 10,000 buys significantly more units at lower NAVs. Investors who continued SIPs through 2008 crash had dramatically higher portfolios by 2014.

Formula

Bear market = Price decline of 20%+ from recent peaknRecovery from X% decline requires: 100/(100-X) - 1 gain to break evenn60% decline requires 150% gain to recover

Real-life example

🇮🇳 India example

Sanjay's Rs 10,000/month Nifty 50 SIP from January 2008. During the crash months (August 2008 to March 2009), he bought units at 50-60% discount. By 2014, his portfolio was worth 3x what it would have been if he had stopped SIP during the bear market and restarted at highs.

Frequently asked questions

Should I stop SIP during a bear market? ▼

Opposite -- continue or increase SIP. Bear markets are when SIPs buy most units at lowest prices. Stopping SIP during a crash and restarting at recovery means missing the cheapest buying opportunity.