The cookie cutter definition of a bear market is ‘when it is 20% lower than its previous peak. Previous peak was 30,025. So at about 23000 we are in a bear market. Every market goes through a pullback, correction and of course a bear market. All economists know that markets go through all phases, and it is a necessary part of the market.
What should you do in a bear market?
- Your growth stocks will fall harder: So if you had a fast growing ‘Growth’ stock in your portfolio, expect it to fall harder than companies which are value stocks or dividend yield shares.
- Value stocks / Dividend yield stocks will not fall that much as a growth stock, but the fact is these too will be a little soft.
- Lesser known stocks will suffer more. So an Indian Hotels or East India hotels may not fall as much as a Speciality Restaurant. Lesser known companies will have this problem of ‘flight to safety’ and its regular investors will also dump the smaller companies to buy bigger companies.
- Defensive stocks like FMCG and Pharma might fall lesser than high growth stocks.
- Infrastructure stocks which are already down may not go up in a hurry.
- If you still wish to be a trader in the market consider options. However do remember that the juice may have already been taken.
after all this keep on the look out for macro data, and company results. If the weather is good, agri production will be up. If the world recovery happens faster the markets will recover faster. If FII money comes in faster, the recovery will be faster. If the nos. do not add up, there could be a problem.
However given Indian conditions you might have to use a lot of your imagination. For e.g. if the freight moved is not increasing, pause. It is possible that coal, and oil are being consumed near their production areas and is not being unnecessarily carted from one corner to another. If the travel numbers are not growing, maybe people are using more electronic form of communication. If car sales are not going up, people maybe using Uber or Ola.
Learn patience. And Exercise it.
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