The battle between bulls and bears is a pretty one-sided one and always has been
12-Apr-2022 •Dhirendra Kumar
Bull markets and bear markets. Phases when the markets rise and phases when they fall. To newbies who are just getting their feet wet in investing, and to punters who trade on momentum, they seem to be two sides of the same coin. Sometimes the markets rise, sometimes they fall. Sometimes you make money, sometimes you lose. If you're lucky, or if you get the right information, then you make more money than you lose. That's the way it goes.
Except that it does not. For investors who have been around for a while, and invest carefully and sustainably, it's a very different experience. They do not experience the eternal bulls vs bears struggle that is generally depicted in the media. Instead, they experience generally long periods of steady gains, punctuated by a few manic phases.
Don't believe me? Let's just glance at the Sensex since about 1980 or so, which is pretty much its entire history. 1980 started with the Sensex at about 120. Until mid-1986, it rose strongly, reaching just above 600 around April. That's 500 per cent in six years. Then came a two-year decline, when it fell to just below 400 by mid-1988. Then came a steady bull run which kept getting maniacally steeper as Harshad Mehta and others got into the act after the first liberalisation, ending at about 4,400 in April 1992. In just about one year, by mid-1993, it fell to around 2,200. After that, it started rising again and was back above 4,000 by the end of 1994.
Then came the 1990s, during which the Sensex essentially mostly stayed between 3,000 and 5,000 as the Indian economy digested the reforms and sorted out the winners from the losers. There were some manic phases which looked like a big deal at the time but the turning point came in June 2003, when the number started upwards from 3,500 and touched 20,000 in early 2008. And then of course it fell to less than half in just over a year.
After that, punctuated by some stagnant periods and some relatively weak periods, we have had a steady increase in stock prices, with a brief interruption caused by the initial panic of the Chinese virus. This is very far from an equal struggle between bulls and bears that punters view the equity markets as. This is essentially a long and steady rise. Sometimes, the rise gets ahead of itself and so has to revert to mean. Sometimes there are scams or viruses. However, all things considered, this is a one-sided story.
In fact, let's do something unusual. Let us consider the progression from bottom to bottom. Look at where the Sensex ended up after those terrible bear markets. We'll start at 120 points in 1980. Here's the bottom-to-bottom series after that. March 1988: 390; July 1993: 2,100; September 2001: 2,600; March 2009: 8,200. April 2020: 28,000.
Those were the sad times when investors were down in the dumps. And yet, the progression doesn't look so bad, does it? As I said, this is basically a one-sided story. Even after the supposed bear phases have done their worst, the direction is clear. The bulls-vs-bears struggle is not really there, except over the very short periods that the punters and the traders operate in.
Since April 1979, which is when the Sensex was calculated back to, there have been close to 10,000 trading days, 9,983 as per my database. Out of these, the Sensex fell on 4,681 days and rose on 5,302 days. That looks like a fairly close match, and this is where the idea of the eternal struggle comes from. People whose trading horizon is in hours or days genuinely get the feeling that anything can happen on any given day, and they are right in their own way. Those of us who invest for years or even decades know that it pretty much goes up all the time.
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