Bull and Bear market one of the most basic and important concepts in stock market investment. You often heard that investors are discussing in a news channel or newspaper that the market is bullish or bearish.
Therefore, if you are a beginner in the Indian stock market, then before start you must know what the current market characteristic is. So, in this article, we will discuss the bull and bear market in the Indian stock market.
What is a Bull Market?
The bull market is a term which is used to describe the stock market situation when it is in a rising phase. So, it is mainly a financial situation which improves investor’s confidence and motivates them to purchase much more stocks with a certain expectation of solid return.
So, it takes place when the economy is strengthening or when it is already strong. The bull market refers to the stock market. But it also implemented to anything that is traded such as bonds, currencies, commodities, etc.
What is Bear Market?
A bear market is a period in which share prices are falling consistently and encouraging selling in securities. Therefore, it is precisely the opposite of a bull market. During bear market periods, investing become risky even for experienced investors. Many investors opt to sell off their stocks during a bear market for fear of further losses. Hence, it fuels a vicious cycle of negativity in the stock market. Although, bear market marked by a 20% downturn or more in stock prices over at least a two-month timeframe.
Origin of terms
The terms “bull” and “bear” derives from the way in which each animal attacks its opponents. These actions were then related similarly to the movement of the stock market.
A bull use to thrust its horns up into the air to attack other animals. So, stock market when rises upward it’s called the bull market.
In other hands, a bear will usually swipe its paws in a downward motion at the time of the attack. Therefore, if stock prices declining consistently and following down trends are called bear markets.
What drives the Bull and Bear market?
The Indian stock market faces a lot of volatility driven by news and events in the global market and affects a lot by economic and social factors. So, there are many important factors which drive the Indian stock market either bull or bear market.
Indicators of a Bull market:
These are the factors that help to build the confidence of the investors to invest money in the share market and gives rise to a Bull market.
- Increased GDP rate
- Rising economy in the nation
- High employment levels
- Stable economic and social factors
- New technologies or companies which encourage the investors to invest money in stocks
- Positive news flows in the global economy
Indicators of a Bear market:
On the other hand, these are the factors that lead to falling in the prices of the shares and is established a bear market.
- Deteriorating economy level and company downsizing.
- Decreasing employment which makes investors far less willing to invest money in the stock market.
- Falling GDP rate is an influential factor of the bear market.
- Unstable social and economic factors.
- A sudden international crisis will always create a bearish market as the economies are affected negatively.
Effect of Bull and Bear market in Indian stock market
In the following comparison chart, we will discover what the effect of bull and bear market in the Indian stock market.
|FACTORS||BULL MARKET||BEAR MARKET|
|Position||Takes long position||Takes a short position|
|Prices of stock||High||Low|
Bull and Bear market example for Indian stock market
There was the number of bull and bear market phase arise in Indian stock market up to till date. So, let’s have some examples.
India’s Bombay Stock Exchange (BSE) Index, i.e. SENSEX was in a bull market trend for about five years.
Bull phase: 15 May 2003 to 8 Jan 2008
Sensex peak: 20873
Sensex low: 3012
Bear phase: 14 Feb 2000 to 24 Sep 2001
Sensex peak: 6151
Sensex low: 2627
So, none of the types of a market can serve forever. Therefore, bull and bear market also does not last endlessly. It is difficult to predict the changing trends in the market. But to be a good investor we can try to be more updated with the current trend.
A wise investor can take advantage of rising prices by buying stocks early in the trend and sell them with a handsome gain. Certainly, this required extensive research, observation, and analysis.
On the contrary, it is wise for an investor to buy more shares during a bearish market. As in this time usually, shares are available at a cheaper price. Then sell your shares at a higher price and book a good profit. But, we always recommend for doing proper fundamental and technical analysis before buying or selling any share to reduce a loss of your capital.
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