A guide to thriving in bull and bear market cycles

Every investor, seasoned or not, cannot avoid bull and bear markets. They are part and parcel of equity investing. These cycles are intrinsic to how financial markets operate. The inevitability of these cycles cannot be demonstrated better than the historical peaks and troughs of the Sensex: 1980: Began at 120 points. 1986: Reached 600 points, a 400 per cent leap! 1992: Peaked at 4,400 during the Harshad Mehta bull run. 2000: Tech euphoria fuelled it to 5,900. 2001: Dropped to 2,600 after the tech bubble burst. 2008: Hit 20,800 before the global financial crisis. 2009: Crashed to 10,400 during the global real estate crash. 2020: Covid crash plunged it nearly 23 per cent to 29,460 in March 2020. 2024: Surged 3.3 times since March 2020 lows to above 85,900. This shows that markets move between exuberance and caution. But despite setbacks, equities demonstrate strong and consistent growth over the long term. What causes bull and bear markets? Bull markets typically kick off when investor expectations turn optimistic based on economic strength, industry growth, and profitability. As these conditions persist, speculative behaviour takes over. Many investors only focus on the rising prices and end up ignoring the underlying businesses. As a result, capital influ

This article was originally published on October 04, 2024.