Last Updated on December 18, 2021 at 10:54 pm
It can be extremely educative when the Sensex chart is plotted such that past bull and bears runs can be compared to more recent such movements. This can be easily accomplished by plotting the Sensex closing value as a logarithm. This reveals a fascinating staircase pattern that is discussed in this post.
A log chart is also known as an equal interval chart and gives a better visual representation of rises and fall.
Normal Sensex Chart
Here is the normal Sensex chart.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
The most striking feature of this chart is the 2008 crash and the bull run that preceded it. Details of past market movements are not quite visible.
Sensex Log Chart (plain)
This is the Log (base =10) chart of the Sensex. Notice how past features have now not only become prominent but are also on the same scale as that of newer features.
Sensex Log Chart (annotated)
In orde to get a sense of the features, I had added several indicators (drawn with the full benefit of hindsight – only for illustration) .
The Green lines First let us look at the green line at the bottom left of the picture. It represents the bubble before the Harshad Mehta scam. For a good read on such market bubbles, see Review: Riding The Roller Coaster -Lessons from financial market cycles we repeatedly forget
The increase in Sensex value over the course of this green took only year! A leap from 3 to 3.6 (log) ~ 0.6(a little more).
Now look at the second green line between the two dotted horizontal lines. This is great bull in the 2000s. This increase is identical in magnitude to the Harshad Mehta bubble. Except that it occurred over 3+ years. This is a simple illustration of the power of the log chart.
The Red lines The red lines, as you may have guessed, represent crashes. The Harshd Mehta scandal, the dot-com bust and the 2008 crash are also very similar in magnitude. A fact that the plain chart (top graph) cannot reveal.
The violet lines They represent sideways markets. The first one last more than a decade. The second line is a projection in time.
Have we recovered from the 2008 crash? If we look at the plain chart, our answer could be yes! In log scale, the recovery (if any) is only marginal.
The staircase pattern should be obvious now. Every big upward movement (so far) has resulted in a prolonged sideways market that would last for years. A fact that new equity investors should be aware of.
Which is why we all need to ask ourselves, am I ready to climb the Sensex Staircase?!
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- 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.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
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 ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), 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 3,000 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 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 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 is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the 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 with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will 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 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)