Bull Market Rally Vs Bear Market Rally

Ever since equity markets have displayed a swift recovery following a rapid fall in 2020, investors are being advised to remain cautious on deploying fresh monies by several stock market experts, who are calling the remarkable recovery as just another bear market rally. So what exactly is a bear market rally and can one distinguish it from a bull market rally? Yogesh Supekar along with the DSIJ Research Team identifies the typical characteristics of bear and bull market rallies and the aspects that differentiate the two.

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Figure this out: Over 100,000 Americans have lost their lives and more than 40 million US citizens are unemployed. In fact, these figures are supposed to reflect the worst unemployment status the USA has ever witnessed. In this context, guess what happens to the stock market: Dow Jones Industrial Average Index (DJIA) is up by more than 7 per cent in one month while Nasdaq is up by more than 10 per cent in a single month. From its low made on March 23, 2020, the DJIA is up by nearly 36 per cent! Can anyone believe such numbers after considering the dismaying scenario that actually exists in reality?

In India, the unemployment level is at a historic level, the macroeconomic situation is deteriorating, virus-infected cases are touching record highs and the NPA situation is expected to get worse. Reality is not pleasing at all with many businesses expected to shut shop permanently, further testing the abilities of the Government of India to revive the economic situation. While this is the stark reality of India, the Sensex is up by nearly 28 per cent from its lows made on March 23, 2020, when the key benchmark index touched 25,981. The Sensex fell almost 38 per cent from its high of 41,952 which it touched in 2020.