Major Nifty falls and recoveries; it took over 1,000 days to recover from the 2008 lows

In 2020 so far, stock markets globally have witnessed sharp correction as traders have sold in panic on fears of the novel coronavirus, or COVID-19, pandemic.

In India, the Nifty tumbled as much as 38 percent on March 23 from its high of 12,363 touched on January 14. Of late, it has recovered 18 percent from the bottom.

But that wasn't the only steep fall on the Nifty. Since 2006, there have been 18 instances of steep market corrections where the Nifty corrected in excess of 10 percent.

The recovery-to-correction ratio (in days) tracks the speed of market recovery. The average stands at 3.7 times for all 18 instances. It reduces to 2.6 times whenever it took less than six months to regain the peak.

However, the quantum of the COVID-19 market correction has only two parallels since 2006. In the 2008 global financial crisis, the Nifty corrected by 60 percent and the recovery-to-correction ratio was 3.5 times. In 2006, it witnessed a 30 percent correction, with the recovery-to-correction ratio at 4.9 times.

Key reasons for the market orrections as stated in the Elara Capital report:

In 2008, markets fell 60 percent: Great financial crisis triggered by the collapse of Lehman Brothers

In 2006, markets fell 30 percent: The rise in US inflation and yield; a resurgence of inflation and a series of monetary tightening measures by central banks across the world, including a surprise increase in the policy rate by the Reserve Bank.

In 2010, markets fell 17 percent: This period saw high domestic inflation and the narrative turning negative due to lack of reforms by the UPA 2 government

In 2016, markets fell 16 percent: Fear of China slowdown amid earnings downgrade and oil at record lows.