The previous multi-year bullish drive lasted four and half years (between March 2012 and July 2016). The biggest upswing was from a low of 1,022 points in November 2015 to a high of 1,888 points in July 2016. From November 2015, it ran like a non-stop one-way train without experiencing multi-week corrections. The generation that entered the secondary market at the start of 2012 had not witnessed the bitterness of bearish market in their life. The continued north-bound train with just a couple of serious corrections made people feel that the secondary market is the only place where the price (of the stock) will keep increasing and one can hardly lose money. With time, prudent investment practices turned into euphoric charges. Greed took over and risk started to increase. No one wanted to miss a chance to get on the bandwagon. Gordon Gekko became the god and everyone started chanting “greed is good”!
The sellers pulled the plug on 31 July 2016. Supply started to exceed the demand and the next three weeks saw continued retracement till the index reached 1,722, losing 166 points in the process. People could not believe that it was the start of the bearish trend.
The majority sincerely hoped this to be a normal long-overdue correction and treated the situation as another opportunity to enter the market. The demand pushed back and managed to counter the situation, till the index was back up at 1,820 points, in two weeks. The upswing met resistance at 1,820-ish and the bulls were pushed back. The next wave of retracement again lasted till 1,725, reaching the previous low, and finding the support at the same zone of 1720-ish.
Prudent investors and traders were cautious by now. They stopped active buying and instead entered a systematic selling mode. The zone of support at 1720-ish pushed the market back into northern territory. As it neared 1820-ish, the market again met stiff resistance and demand started faltering.
This was a clear sign of double top forming for the ones who have some understanding of technical analysis. Massive selling ensued from the first week of October 2016. Within next four and half months (mid February 2017), the market shed 520 points reaching the bottom of 1250-ish.
Between February 2017 and mid-October 2019, there had been three upswings followed by continued bearish movements. The highs of each of these swings were lower than the previous highs of the upswing (called lower-highs indicating continued downward movement), while the bottoms of each of two downward reversals made lower-lows (i.e. new bottom of the current downward movement is lower than the bottom of previous downward movement).
In March 2019, the market hit an all-time low of 1,100. The support experienced at 1,100 pushed the market up till 1,330-ish by mid-May, gaining 230 points in the process. Between mid-June and early August, it saw sideways movement giving hope that it could be the bottom of the multi-year bearish reversal. But the market experienced another southbound plunge from mid-August, again testing the support zone of 1,100-ish.
The hope at the moment is the market will go sideways, which will give some confidence to the investors and create a sense of optimism for new money to enter the market. Current market rates of majority of stocks are at their bottoms reflected in lower PE (price to earnings) ratios. This could encourage people to hold on to their existing portfolios and to enter the systematic accumulation process slowly, drying up the excess supply.