Anatomy of a bear market in equities
In past seven weeks, the Indian equity markets have corrected sharply. The benchmark Nifty50 index has fallen almost 9% in this period. The gauge of fear (volatility index) has risen over 60% in this period of seven weeks. This sharp correction in values, when everything appeared to be working normally for Indian equities has triggered an intense debate about the sustainability of present levels of equity prices. Some prominent analysts and investors have highlighted that the 11 year old bull phase in global equities that started post Lehman collapse and commencement of easy monetary policies may just about to be over. The disruptions created by spread of coronavirus (COVID-19) may have opened many fault lines in the global financial system, hitherto camouflaged by the persistence monetary stimulus by central bankers. Many technical analysts and chartists also fear an extended winter for Indian equities this time. Since I have recently increased my allocation to ...