Last Updated on December 29, 2021
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.
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.
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
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.
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.
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!
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).
🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
Use our Robo-advisory Excel Tool for a start-to-finish financial plan! ⇐ More than 1000 investors and advisors use this!
New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
- Follow us on Google News.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Join our YouTube Community and explore more than 1000 videos!
- Have a question? Subscribe to our newsletter with this form.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!
Explore the site! Search among our 2000+ articles for information and insight!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu gets a superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)