Has this been the biggest bull run in the Indian stock market?

Published: September 29, 2021 at 8:51 am

Neeraj asks, “Dear Pattu Sir, are we in the middle of the biggest bull run in the history of the Indian stock market? If we look at the market momentum since March 2020, it seems to be the sharpest increase ever seen. Can you please let me know if I am right?”

When I first read this question, I thought to myself, “surely there must be bigger market movements in history that can be seen when we plot Sensex movement on a log graph”. The results were surprising. To be on the safe side, the title was phrased in the past tense!

When we look at the markets in a normal graph, we often tend to think like Neeraj. As seen from the graph below, the bull or bear market that we currently witness always seems to be bigger. However, we must plot the market movement so that 10% gain or fall in 2021 can be compared with a 10% gain or fall in 2000 or earlier.

Sensex TRI since Aug 1996 with bull run from March 2020 indicated by an oval
Sensex TRI since Aug 1996 with the bull run from March 2020 indicated by an oval

The solution is to plot the movement on a logarithmic scale. Instead of using the default option available in any charting solution, computing the log10 value and plotting it like a regular graph is better. Caution: Identifying bull and bear markets can only be done in hindsight. In real-time, we do not know what the future holds. Also, we shall confine ourselves to the large cap (or giant cap) universe. The mid cap and small cap segments or sectoral indices may have seen more significant moves.

In this scale, the y-axis ranges from 2 to 3.5 with 0.1 subdivisions. A market movement from 2 to 2.3 (+0.3) is identical to a market movement from 2.7 to 3 or 3.1 to 3.3. This means bull runs (and crashes) from different decades can be visually compared.


Sensex TRI shown in a log 10 scale. The dot com boom is marked a black line which has also been place over the bull run from March 2020.
Sensex TRI is shown on a log 10 scale. The dot com boom is marked as a black line which has also been placed over the bull run from March 2020.

We can paste this graph on a simple graphing tool like MS Paint and draw a line over the dot com boom (down arrow in the picture). Then we can move the black line and place it on any other bull run for a quick (but crude) comparison.

The black line is placed next to the current bull run  (from March 2020; up arrow). We can immediately see that the March 2020- present momentum is higher and lasted longer than the dot com boom.

The fastest uninterrupted bull run (untainted by scandal*) is possibly between May 2003 and Jan 2004. We often tend to view 2003-2008 as a bull run, conveniently forgetting two significant falls that occurred in between. See: If a Bull Market can be this bad! 

* We, therefore, do not consider the 90-92 bull run. The market moved up 267% in FY 1991-92 but crashed only by 47% when the details of the Harshad Mehta scam broke out. Our “long term market return” fixation is therefore soiled by this scandal. See: Sensex return is 16% plus over last 41 years, but half of that came from just three good years! And Understanding the Nature of Stock Market Returns.

In the graph below, the current bull run is superimposed on the market movement from May 2003.

Current bull run in the Sensex superimposed over Sensex movement from May 2003
The recent bull run in the Sensex superimposed over Sensex movement from May 2003

The momentum from May 2003 to Jan 2004 was much more significant than the current run from March 2020. However, if we look beyond that, the recent run has been a lot smoother and profitable. I did not expect that!

Current bull run in the Sensex superimposed over Sensex movement from May 2003 to early 2009
The current bull run in the Sensex superimposed over Sensex movement from May 2003 to early 2009

Naturally, there is no way to know how long the current run will last (it may be ending as you read this!). Also, as one can see from the above graph, there is a long way to go before we reach the dizzy heights of one of the most profitable periods in the stock market (in terms of gain over the same duration) until it was interrupted by the 2008 global financial crisis. That said, the current bull market is indeed a contender for one of the biggest bull runs in the Indian stock market (much to my pleasant surprise).

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