The Indian markets that have entered the bear phase this week with the broader market sliding to it lowest in over two years after the World Health Organisation (WHO) termed it a pandemic and the government imposing travel restrictions suspending tourist visas for foreigners.
Investors woke up to a Black Friday as equity indices crashed by nearly 10 per cent with coronavirus panic selling globally hitting almost every asset class.
At 10 am, the BSE S&P Sensex was down by 3,091 points or 9.43 per cent to 29,688 while the Nifty 50 cracked by 966 points or 10.07 per cent to 8,624. The trading was halted for 45 minutes as the Nifty hit a 10 per cent lower circuit. In the pre-opening session after the trade halt, the Sensex fell by over 3,500 points.
All sectoral indices at the National Stock Exchange were floating in red with Nifty IT down by 13.15 per cent, PSU bank by 12.96 per cent, metal by 11.83 per cent and auto by 11.38 per cent.
Well, while we enter the bear phase, here's all you need to know about the bear market and what happens when a market enters this phase.
What's the difference between a bear market and market correction?
While there's a slight difference between the two, they are often viewed as the same in financial terms. But no, it is not exactly the same. A bear market is triggered when a stock falls over 20% from the recent high. This phase lasts longer than a market correction phase. A market correction phase is, however, short lived.
Why are the investors worried?
Nifty fell below its 10,000 mark reflecting a fear amongst the investors amid the coronavirus scare. The rise in number of cases has also led to government putting restrictions in place on travellers and tourist visas being cancelled. This has also led to cancellation of key events that have implication on the economic situation.
Earlier, credit rating agency Moody said that the virus brings a risk of recession this year alongwith it. While cutting its forecasts, ir said that economies including US, Japan, Italy, Germany, France, UK and Korea could step into the period of recession in case of an adverse scenario.
When was the last time Inida entered a bear phase?
Nifty fell from a high of 12,430 on January 20 to 9,648.This is not the first time Indian markets have entered this phase. The last encounter with the bearish phase dates back to 2015. Back then, Nifty recorded a fall at 9,119 points dropping by over 25%.
How long does this phase last?
Decline in the indices have not gone beyond 28% and data suggests that market could recover from this phase. Well, the last time the markets went down so low, it took two years to recover to the same level. Experts say that once the fears of the virus fade away, the markets could go back to the same position.