Why Every Market Dip Is Your Next Big Chance

The trading day started on a strong note, but the markets gave up some gains by the end. Even then, the overall trend showed that underlying strength still remains.

The spotlight of the day was clearly on capital market related stocks such as BSE and Angel Broking. There was news that SEBI may soon come out with a consultation paper on longer duration contracts for options and futures. This created a fear that weekly options might be discontinued, which kept pressure on such stocks.

Adding to this, just yesterday we saw the government move very quickly against online betting. The new bill was cleared in both the Lok Sabha and Rajya Sabha. This is significant because some big companies, like Dream11, have built massive businesses around online gaming. Dream11 alone has annual revenues of nearly ₹67,000 crores and is a sponsor of the national cricket team. But now, suddenly, the future of such businesses looks uncertain.

• Looking at the indices, after four days of continuous gains, the Nifty seemed to be taking a pause today. It closed with a small gain of 0.13%.

• Nifty Junior lost 0.28%, midcaps slipped 0.42%, while small caps stayed flat at 0.08%.

• Surprisingly, Bank Nifty, which looked weak yesterday, ended positive with a 0.1% gain.

• Gold prices moved up to ₹99,35 per gram, while the rupee lost about 25 paise against the dollar.

Other Market Triggers

• In sectoral moves, pharma stocks were buzzing with Cipla, Dr. Reddy’s, Sun Pharma, and Lupin doing well. Reliance, ICICI Bank, and Bajaj twins were also among the gainers.

• On the losing side were Coal India, Power Grid, Adani Ports, some FMCG names, and auto stocks, though losses were not very large.

• In the Nifty Next 50 index, TVS Motors and Swiggy were notable gainers, while Dabur fell 3.6% and Britannia slipped 1.8%.

• The biggest stock mover of the day was BSE, which fell sharply by 7.5%. This came after rumors that weekly contracts might be removed.

What to watch next ?

• If online betting is banned and weekly options are taken away, the big question is where will speculators go? Many traders want to participate every day, even though it may not be the best practice.

• One possible outcome is that cash market volumes might rise again, especially intraday. If only the Finance Ministry would consider reducing the STT rates, the cash market could become vibrant again.

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What To Read This Week ?

Why Every Bear Market Creates the Next Big Bull Run

This edition dives into the historical cycles of bear and bull markets, offering a perspective that encourages long-term thinking over short-term panic. We'll explore data points that highlight a fundamental truth of investing: resilience is key.

A Historical Look at Market Cycles

The provided chart, based on S&P 500 data from the U.S., offers a compelling visual of the market's cyclical nature.

It tracks the duration and severity of various bear markets (below the zero line) and the subsequent length and gains of bull markets (above the zero line). Notable bear markets from 1973, 2000 (the "tech bubble"), and 2007 (the "global financial crisis") are shown to have seen declines of nearly 50%. The chart contrasts these with the powerful rallies that followed, such as a 100% gain after the tech bubble and a remarkable 400% gain after the 2007 crisis.

The Power of Patience

A crucial takeaway from this analysis is the disparity in both duration and magnitude between bear and bull markets. Historically, the average bear market has lasted about 14 months, with an average loss of 38%. In stark contrast, the average bull market has extended for roughly 70 months, delivering gains that are, on average, approximately five times the losses seen in the preceding downturn.

This suggests that the time and gains spent in a bull market far outweigh the pain of a bear market, making long-term participation critical for investors.

Rethinking Your Perspective on Market Dips

The natural human tendency is to feel disappointed when a portfolio is down, perhaps by 10%, 20%, or even more from its peak. However, this chart encourages a shift in perspective. Instead of focusing on temporary losses, one should look at a bear market or a period of consolidation as the foundation for the next major rally. The longer and deeper this consolidation is, the higher the bull market is likely to be when you come out of it.