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08 Apr 2020 by Pradeep U
How Much Time will Your Share Market Investments Take to Recover?

In one of our earlier articles we had spoken about how India's recovery is just about to begin. You can check out the same here.

One of our readers wrote back to us with a question

"I am indeed convinced that India's recovery is imminent but my question is how long would it take for my share market investments to recover after a bear market?"

I am sure many of you too would be having the same question in your minds.

So, to answer this question, let's look at the data of the past when bears took over the share markets in India.

However, before we proceed further let's look at what exactly is a bear market. A bear market is when the share market experiences prolonged price decline. A situation in which stock prices fall by 20% or more from recent highs amid widespread pessimism and negative investor sentiment.

History of major corrections and the time taken for recovery in the share market in India

From the data in above table we can infer that the average % of fall during a bear market is 53% and the average recovery rate of Sensex from its lowest point during the bear market phases is 74% after 6 months, 117% after one year and 140% after 2 years.

Now let's compare this data with the current bear market.

From a high of 42,273 in Jan 20, the Sensex has corrected to a low of 27,590 (as on 3rd April 2020) which is a correction of approximately 34%.

I don't want to time the bottom here, but as per the history, there can be a scope for further fall in the market (although limited). The whole point here is that irrespective of the time taken, markets will eventually recover as seen in the case of previous bear markets.

The good news has already started to trickle in

Latest data reveals that manufacturing activity in China has rebounded from record lows in March despite the huge pressure the country has faced over the last few months in tackling the Coronavirus.

Ultimately it is important for every long-term investor to keep in mind that the value of your portfolio does not really matter in the short term. Bears may continue to have a ball for another few months or may get wiped out soon, but remember few years down the line nothing will stop your portfolio from outperforming if you have invested in quality stocks.

               Invest in a well-diversified portfolio of good quality stocks now

Here is an apt quote for the current situation by columnist Morgan Housel "It looks bad today. It might look bad tomorrow. But hang in there. We'll get through this."

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