Stock Market is Falling, is there any future left in the market?

In the last five months, market has fallen sharply. BSE Sensex which was 85,106 on 26/09/2024, closed at 73,141 on 28/02/2024 registering a fall of more than 14%. Mid Cap and Small Cap Index (Stocks) have fallen (22-25%) much more than the large-cap stocks/index during the period.

Most of the investors are worried, rightly so, due to the sudden fall in the market and want to understand, whether they should remain invested in such a negative scenario or exit by booking the losses. The current fall is attributed to weak corporate results, FIIs selling from the domestic market, Global trade tensions and uncertainty due to Trump’s higher tariff policies against major importing countries, Rising US yields making it attractive for FIIs to invest in home country etc. and few more.

Based on historical data, we conducted this study to understand the market's behaviour at previous falls and what the strategy should be in such a scenario.

We have analysed past six falls since 2000, so let’s look at them to understand it in more details.

 

1.  The DOT COM Bubble

Price Correction of 56% in 19 Months

▲ 14 Feb 2000: 5923 Points

▼ 21 Sept 2001 : 2594 Points

Time of correction: 2.3 years, before it made new high above 5923 Points

02 Jan 2004 – 5944 Points, i.e. recovered by 129% from the bottom level

14 Feb 2005 (5 years from earlier peak) :  6659 Points (Recovery of 156%)

12 Feb 2007 (7 years from earlier peak) : 13805 Points (Recovery of 432%)

 

Date	BSE Sensex	Change in Points	% Change		Scenario-1 Investor-A	Scenario-2 Investor-B	Scenario-3 Investor-C
14-02-2000	5923.17				1,00,000.00	1,00,000.00	1,00,000.00
21-09-2001	2594.87	-3328.3	-56.19%		43,808.81	43,808.81	93,808.81
02-01-2004	5944.23	3349.36	129.08%			1,00,355.55	2,14,893.66
14-02-2005	6659.64	4064.77	156.65%			1,12,433.71	2,40,756.91
14-02-2007	13805.36	11210.49	432.03%			2,33,073.84	4,99,086.40
Profit/Loss					-56,191.19	1,33,073.84	3,49,086.40

 

Let’s look at three different scenarios and see what happens to the profits/returns.

Scenario-1, Investor A invests Rs. one lakh at the highest level and sells his entire holding at the bottom level books losses and exits from the market.

Scenario-2, Investor B also invests one lakh at the highest level but when the market goes down, he doesn’t do anything, just remains invested and sells his portfolio at the end of 5/7 years.

Scenario-3, Investor C also invests money at the same highest level as Investor A and B. However, he invests an additional Rs. 50,000 at the bottom of the market and sells his portfolio at the end of 5/7 years.

The results:

Investor-A simply books a loss of Rs. 56,191.19 on 21/09/2001.

Investor B- Portfolio value increases to Rs. 2,33,073.84 at the end of 7 years. By remaining invested for 5 years and 7 years his portfolio value is in profit of Rs. 12,433 and Rs. 1,33,073 respectively.

Investor-C- Portfolio value increases to Rs. 2,40,756 at the end of 5 years. If he remain invested for  7 years his portfolio value increases to Rs. 4,99,086 which is more than three times of his invested amount.

 

2. Global Financial Crisis 2008

Price Correction of 63% in 7.5 Months

▲ 09 Jan 2008: 20701 Points

▼ 27 Oct 2008 : 7697 Points

Time of correction: 2 years, before it made new high above 20701 Points

05 Nov 2011 – 20962 Points, i.e. recovered by 172% from the bottom level

09 Jan 2013 (5 years from earlier peak) :  19627 Points (Recovery of 155%)

09 Jan 2015 (7 years from earlier peak) : 27119 Points (Recovery of 252%)

Date	BSE Sensex	Change in Points	% Change		Scenario-1 Investor-A	Scenario-2 Investor-B	Scenario-3 Investor-C
09-01-2008	20701.49				1,00,000.00	1,00,000.00	1,00,000.00
27-10-2008	7697.39	-13004.1	-62.82%		37,182.78	37,182.78	87,182.78
05-11-2010	20961.98	13264.59	172.33%			1,01,258.32	2,37,421.22
09-01-2013	19627.16	11929.77	154.98%			94,810.37	2,22,302.68
09-01-2015	27119.63	19422.24	252.32%			1,31,003.28	3,07,164.48
Profit/Loss					-62,817.22	31,003.28	1,57,164.48

 

The results:

Investor-A Simply books a loss of Rs. 62,817.22 on 27/10/2008 and exits from the market.

Investor B- Portfolio value increases to Rs. 1,31,003 at the end of 7 years. By remaining invested for 7 years his portfolio value is in profit of Rs. 31,003.

Investor-C- Portfolio value increases to Rs. 2,22,302 at the end of 5 years and at 7 years, his portfolio value increases to Rs. 3,07,164 which is more than double of his investment amount.

 

3. Crash of 2015-16

Price Correction of 24% in 12 Months

▲ 03 March 2015: 29634 Points

▼ 29 Feb 2016 : 22494 Points

Time of correction: 12.5 months, before it made new high above 29601 Points

17 March 2017 – 29601 Points, i.e. recovered by 31.60% from the bottom level

03 March 2020 (5 years from earlier peak) :  38142 Points (Recovery of 69.56%)

03 March 2022 (7 years from earlier peak) : 54931 Points (Recovery of 144.2%)

 

Date	BSE Sensex	Change in Points	% Change		Scenario-1 Investor-A	Scenario-2 Investor-B	Scenario-3 Investor-C
03-03-2015	29634.87				1,00,000.00	1,00,000.00	1,00,000.00
29-02-2016	22494.61	-7140.26	-24.09%		75,905.88	75,905.88	1,25,905.88
17-03-2017	29601.86	7107.25	31.60%			99,888.61	1,65,686.28
03-03-2020	38142.30	15647.69	69.56%			1,28,707.50	2,13,488.48
03-03-2022	54931.48	32436.87	144.20%			1,85,360.96	3,07,460.17
Profit/Loss					-24,094.12	85,360.96	1,57,460.17

 

The results:

Investor-A Simply books a loss of Rs. 24,094 on 29/02/2016 and exits from the market.

Investor B- Portfolio value increases to Rs. 28,707 at the end of 5 years. By remaining invested for 7 years his portfolio value is in profit of Rs. 85,360.

Investor-C- Portfolio value increases to Rs. 2,13,488 at the end of 5 years. By the end of 7 years his portfolio value increased to Rs. 3,07.460 which is more than double of his investment amount.

 

4. Crash of 2018-19

Price Correction of 14.11% in 2 Months

▲ 28 Aug 2018: 38,760 Points

▼ 26 Oct 2018 : 33291 Points

Time of correction: 5 months, before it made new high above 38808 Points

01 April 2019 – 38808 Points, i.e. recovered by 16.57% from bottom level

28 Aug 2023 (5 years from earlier peak) :  64776 Points (Recovery of 94.57%)

28 Aug 2025 (7 years from earlier peak) : 73141 Points (Recovery of 119.7%)

 

Date	BSE Sensex	Change in Points	% Change		Scenario-1 Investor-A	Scenario-2 Investor-B	Scenario-3 Investor-C
28-08-2018	38760.58				1,00,000.00	1,00,000.00	1,00,000.00
26-10-2018	33291.58	-5469	-14.11%		85,890.30	85,890.30	1,35,890.30
01-04-2019	38808.74	5517.16	16.57%			1,00,124.25	1,58,410.37
28-08-2023	64776.92	31485.34	94.57%			1,67,120.62	2,64,407.86
28-02-2025	73141.27	39849.69	119.70%			1,88,700.14	2,98,549.65
Profit/Loss					-14,109.70	88,700.14	1,48,549.65

 

The results:

Investor-A Simply books a loss of Rs. 14,109 on 26/10/2018 and exists from the market.

Investor B- Portfolio value increases to Rs. 67,120 at the end of 5 years. His portfolio value is in profit of Rs. 88,700 if he continues till the end of seven years.

Investor-C- Portfolio value increases to Rs. 2,64,407 at the end of 5 years. By remaining invested for 7 years his portfolio value increases to Rs. 2,98,549 which is almost double of his investment amount.

 

5. COVID Crash 2020

Price Correction of 38.74% in 2 Months

▲ 17 Jan 2020: 41850 Points

▼ 24 Mar 2020 : 25638 Points

Time of correction: 7.5 months, before it made new high above 41383 Points

06 Nov 2020 – 41383 Points, i.e. recovered by 61.41% form the bottom level

17 Jan 2020 (5 years from earlier peak) :  76,263 Points (Recovery of 197.45%)

Latest as on 28 Feb 2025 : 73,141 Points (Recovery of 185.27%)

 

Date	BSE Sensex	Change in Points	% Change		Scenario-1 Investor-A	Scenario-2 Investor-B	Scenario-3 Investor-C
17-01-2020	41850.29				1,00,000.00	1,00,000.00	1,00,000.00
24-03-2020	25638.90	-16211.4	-38.74%		61,263.37	61,263.37	1,11,263.37
06-11-2020	41383.29	15744.39	61.41%			98,884.12	1,79,588.22
17-01-2025	76263.29	50624.39	197.45%			1,82,228.82	3,30,954.57
28-02-2025	73141.27	47502.37	185.27%			1,74,768.85	3,17,406.15
Profit/Loss					-38,736.63	74,768.85	1,67,406.15

 

The results:

Investor-A Simply books a loss of Rs. 61,263 on 24/03/2020 and exits from the market.

Investor B- Portfolio value increases to Rs. 1,82,228 at the end of 5 years. As on 28^th Feb 2025 his portfolio value is Rs. 1,74,768.

Investor-C- Portfolio value increases to Rs. 3,30,954 at the end of 5 years. As on 28^th Feb 2025 (despite 14% index fall in five months) his portfolio value is still at Rs. 3,17,406 which is more than double of his investment amount.

 

6. Crash of 2021-22

Price Correction of 17.37% in 8 Months

▲ 18 Oct 2021: 61624 Points

▼ 17 Jun 2022 : 50,921 Points

Time of correction: 5 months, before it made new high above 61643 Points

17 Nov 2022 – 61,643 Points, i.e. recovered by 21.06% from its bottom level

Latest as on 28 Feb 2025 : 73,141 Points (Recovery of 43.64%)

 

Date	BSE Sensex	Change in Points	% Change		Scenario-1 Investor-A	Scenario-2 Investor-B	Scenario-3 Investor-C
18-10-2021	61624.65				1,00,000.00	1,00,000.00	1,00,000.00
17-06-2022	50921.22	-10703.4	-17.37%		82,631.25	82,631.25	1,32,631.25
17-11-2022	61643.27	10722.05	21.06%			1,00,030.22	1,60,558.29
28-02-2025	73141.27	22220.05	43.64%			1,18,688.33	1,90,506.40
Profit/Loss					-17,368.75	18,688.33	40,506.40

 

The results:

Investor-A Simply books a loss of Rs. 17,368 on 17/06/2020 and exits from the market.

Investor B- Portfolio value increases to Rs. 1,18,688 as on 28^th Feb 2025

Investor-C- Portfolio value increases to Rs. 1,90,506 as of 28^th Feb 2025. Despite so much fall in five months, his portfolio value is still a profit of Rs. 40,506. Although he has completed only 3.4 years in investments.

 

7. Present Crisis

Price Correction of 14.06% in 5 Months

▲ 26 Sep 2024: 85,106 Points

▼ Latest as on 28 Feb 2025 : 73,141 Points

How much will it fall further??? Honestly, no one knows !!!

Date	BSE Sensex	Change in Points	% Change
26-09-2024	85106.74
28-02-2025	73141.27	-11965.5	-14.06%

 

Key Learnings are:

1.    Market’s rise and fall is normal thing. In every few years it goes down by 10-15% (sometimes more) and recovers back. When the market falls, people will find reasons for that, however, nobody is so sure about it before the market falls, even if it is very much visible to us.

2.  Booking loss and exiting from the market at lower level is not a wise strategy, we will be converting the notional loss to real losses and will never make profit in such a scenario. 

3. Money invested in the equity market should be for at least 5-7 years, and we should have the flexibility to extend the same.

4. We cannot predict the peak and bottom of any market cycle. However, if we invest more when the market falls (i.e. 10-20% from its peak) chances are very high that we will get a decent return when it recovers back.

5. Investing in a diversified portfolio (Like BSE Sensex, mutual fund schemes etc.) reduces risk as compared to investing in individual stocks unless we are stock market experts and have time & resources to do proper stock-specific research.

6. Mid and Small caps which may give higher returns during a rising market, will be riskier as compared to Large Caps in a falling market. Hence, we need to diversify our portfolio rather than getting overexcited in small & mid-caps.

And Finally: Fall is temporary and Growth is Permanent, and if you hold your portfolio when the market is falling then losses are notional and Profit will be real.

 

Disclaimer: The above analysis and views are the author’s personal opinion based on historical data. The author and any of his associates do not take any responsibility if anyone makes any purchase/sale decision based on the above information. Please consult a SEBI Registered Investment Advisor/Research Analyst/Expert before making any kind of investment decision.