"Bull markets go to people’s heads," Charlie Munger, Warren Buffett’s long-time partner, had famously said. Imagine then what a bull market that is 10 years and running would do to people.
According to research by Morgan Stanley India Company Pvt. Ltd, the country is in the midst of its longest ever bull market. It began after the Lehman crisis when the Nifty 50 index bottomed in March 2009. It has since been on an upward journey that just entered into its second decade.
“This has been India’s longest and slowest bull market with a 16% CAGR in returns. The BSE mid-cap index, with an 18% CAGR, has outperformed the Nifty/Sensex," notes the Morgan Stanley India report. CAGR is compound annual growth rate.
But that isn’t the only odd thing about this bull market. Apart from the fact that returns have been lower than earlier bull markets, there are some other question marks as well. Returns in the past year have been poor for most investors, and it barely feels like a bull market.
To be sure, there is no etched-in-stone measure to define a bull market. One classic bull period in the making is when stocks are steadily rising after touching the bottom. On the flip side, a bull market is considered to have ended when there is a drop of 20% or more after the market tops out.
Indian markets are no strangers to such 20% drawdowns. The first major pullback started in January 2011 and ended in December 2012, dragging the Nifty down 22.5%. Another volatile period lasted a year and ended in February 2016, pulling the Nifty down 22.4%.
However, given that India’s markets are choppier, a drop of 30% is often considered to be the signs of a bear market. This is what Morgan Stanley seems to be relying on.
Another definition of a bull market is when the market gets past its previous peak. Seen like this, this bull market never began in March 2009, but much later. But, whatever measure is used, it’s difficult to agree with Morgan Stanley India’s assessment that this is also the slowest bull market in terms of returns.