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Last Updated : Mar 17, 2020 05:08 PM IST | Source: Moneycontrol.com

Multibagger opportunity? A 30% market fall in past generated wealth in subsequent year

Investors have seen similar situations in the past, and the big takeaway is investing in this market in a staggered way, will create wealth


Indian market is already in a bear phase, down more than 20 percent from the recent highs. Historical data of the past 20 years suggests markets usually create a bottom after falling around 39 percent on average.

The Nifty50 has declined more than 30 percent in the last three months.

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In the last 2 decades, there have been six instances when the market corrected by 25 percent or more, ICICIdirect said in a report.

Out of 6, in four instances correction was more than 30%. In all four instances, one year and two year forward returns for Nifty have been positive, the report added.

ICICI Major corrections

Despite a coordinated response from global central bankers to stem the slowdown and avoid a possible recession, there is a risk-off sentiment in equity markets across the globe which is pushing money out of riskier assets to safe-havens.

Coronavirus scare has grown multi-fold post its spread across the key economic zone of Europe and the US. The number of affected cases in India is not significant but they are rising which does pose a challenge for the government.

The outbreak of the coronavirus will definitely have an overall impact on global as well as Indian GDP growth in the interim. But, investors have seen a similar situation in the past, and the big takeaway is investing in this market in a staggered way, will create wealth.

“Historically, it has been seen that market recovery in such a case is usually sharp and quick and precedes the economic growth rebound. Therefore, we see the current correction as a buying opportunity for the investors who should utilise the declines to lap up good businesses which have comfortable leverage, strong return ratios and enjoy leadership position,” ICICIdirect said in a report.

“The allocation, however, can either be made in staggered or in lump sum, depending on investor’s risk appetite,” the report added.

The last major correction which lasted about 10 months was seen in the market back in 2008 when Nifty lost more than 60 percent of its value.

The fall which started from January and lasted till October gave long-term investors a good buying opportunity because the rally was fierce in the next 1 year as the index rose more than 100 percent.

ICICI Cycle


Indian markets hit a lower circuit last Friday for the first time after 12 years after 2008. Experts feel that volatility will remain until markets believe that the peak of coronavirus (Covid-19) cases have been reached and that maybe some time away.


Globally, governments and central banks need to step in and bring stability and confidence back both for companies and investors. The situation is still better than 2008, suggest experts and investors should look at putting money with a long-term investment horizon.


“Global stock market posts the biggest sell-off since the 2008 financial crisis thus fear of 2008 crises is apparent among the market players. 2008 financial crises & recession resulted from the weak spot of the global economy due to the overheated housing market, weaken banking regulation, poor corporate health and increase number of job losses, etc.,” Amit Gupta, Co-Founder, and CEO, TradingBells told Moneycontrol.


“Whereas the current plunge of the stock market is due to pandemic coronavirus which is external to the economy and natural adversity. The impact of coronavirus caused short term earning recession due to disrupted supply chain that hampered the global demand,” he said.


Gupta is of the view that investors who have put their money in some consistent growth counters of at least 5- 6 years and have bought it at a correct valuation in the stock market in correction could create massive wealth during this phase.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.


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First Published on Mar 17, 2020 10:02 am
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