Mint Quick Edit Stock slump: Are we staring at a bear market?
Subscribe to enjoy similar stories. India’s stock market indices have reached a milestone, with the Nifty 50 having lost a tenth of its peak value attained in late September.
On Wednesday alone, this index shed 1.4% to reach 23,559, marking its fifth-consecutive session of decline. By convention, a 10% fall is spoken of as a correction, which suggests a brief drop before a rally resumes, while a 20% drop from a recent peak is taken as a bear market signal, implying prolonged weakness.
This correction began soon after China’s monetary stimulus package revived its stock market and lured global investors. Foreign portfolio investors have been on a selling spree in India, with some of that money heading for Chinese equities trading at more attractive price-earning (PE) multiples.
Of course, domestic money continues to flow into Indian shares, much of it investment plan-ordained, but if they must reach globally competitive PE multiples to attract global buyers again, then our market may have further to fall. Whether an extended price slide casts a pall of gloom over investors at large may depend on how widely they appreciate the notion of a share having a “reasonable" price, above which it’s overpriced.
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