Last Updated on December 29, 2021 at 5:26 pm
The Sensex has lost 30% of its value since 20th Feb 2020! This is the second-fastest loss of 30% in the history of the Sensex. It took significantly longer during the 200 dot-com crash and 2008 housing crisis!
This is the sequence of daily Sensex returns from Feb 20th 2020: -0.37%, -1.96%, -0.20%, -0.97%, -0.36%, -3.64%, -0.40%, 1.26%, -0.55%, 0.16%, -2.32%, -5.17%, 0.18%, -8.18%, 4.04%, -7.96%, -2.58%, -5.59%.
To get a perspective of the current fall, we need to look at the history of the Sensex. The price has to be plotted in log scale so that are past bull and bear runs can be set on the same scale.
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The advantage of the log scale is the size of both double-headed arrows are the same. It can help gauge the extent of up and down movements. If we plot the x-axis also in log scale we can evaluate the time for these as well. Read more: Are you ready to climb the Sensex Staircase?!
The biggest falls in the Sensex are marked by fat down arrows. These represent the Harshad Mehta Scam (April 1992), Dot Com crisis (Deb 2000), 2008 Housing crisis (Jan 2008) and what we shall refer to as the Feb-Mar 2020 fall
During the unfolding of the Harshad Mehta scam, the market lost 30% in eight days!! It recovered a bit only to hit the 30% level in another 10 days (18 days since April 22nd 1992),
During the 2000 dot-com crisis, the 30% loss mark took 68 days. During the current crisis, it took just 18 days, almost 4 times faster. During the 2008-housing crisis, the market lost 29% in 47 days, rebounded and hit the 30% loss mark again 109 days since 10Jan 2008.
This 47 days to a 29% fall is the reference in the title. The current crisis has led to a 30% fall 2.6 times (47/18) faster than 2008-crisis. If you count the exact 30% loss it is 6-times faster (109/18)!
For the sake of our wealth, let us hope no new records are set in the coming days! Interesting days ahead. Time to understand why we say Mutual funds have no compounding benefit, appreciate risk and learn how to reduce portfolio risk.