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Home / Money / Personal Finance /  MintGenie Explainer - What is Bear Market and when does it happen?

MintGenie Explainer - What is Bear Market and when does it happen?

Motilal Oswal Private Wealth's proprietary Temperature Gauge Index indicates that equity market is in the fair valuation zone. (Photo: A man dressed as a bear pretends to greet the bull statue, at the BSE building in Mumbai.)  (PTI)Premium
Motilal Oswal Private Wealth's proprietary Temperature Gauge Index indicates that equity market is in the fair valuation zone. (Photo: A man dressed as a bear pretends to greet the bull statue, at the BSE building in Mumbai.)  (PTI)

  • When the stock market's price declines over an extended period of time, it is called a bear market. Continue reading to learn more about it.

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Bears and bulls are typical stock market animal metaphors, but precisely how is an animal related to stocks? Consider how each creature assaults its prey: a bull normally raises its horns forward, whereas a bear typically lowers its head. In the similar way, when the market is attacked in a downward motion, it is known as a Bear market.

A bear market occurs when the stock market's price falls for an extended period of time. In other terms, a bear market is defined as a long-term tendency of dropping stock prices. For a market to be categorised as bearish, it must have seen a significant decline of at least 20%. It's characterised by a drop in speculative demand among residents, which reduces the capital sector's overall cash flow.

Bear markets may precede a broader economic downturn, which is terrible for everyone. These markets can endure anywhere from a few weeks to several years, with the average being around 18 months. Bear markets have lasted up to 5 years in the worst-case scenarios.

The post-Covid bull rise has been halted by ballooning inflation, rising interest rates, and the Russia-Ukraine war, which has put immense pressure on stock markets around the world.

The S&P 500 index, which has a market cap of almost $38 trillion, is already in bear market territory, and the benchmark Nifty 50 and Sensex are dangerously close. 

This story was first published on MintGenie and can be accessed here

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