Likelihood of Indian stocks entering bear market is high, says Zerodha's Nikhil Kamath

The probability of Indian stocks entering a bear market – falling over 20 per cent from the peak level – is quite high as markets globally are seeing that trend, says Nikhil Kamath of Zerodha. 

“I think it is quite high. The likelihood of that [Indian equities entering bear market] happening is high. I don’t see why when the rest of the world were to go into a bear market, we will not. If everyone else enters a bear market, we will enter one too,” Kamath told Business Today. 

He added that factors related to general slowdown, geopolitical, inflation, trade deficit and slowing growth are currently the biggest concerns in the market. 

This assumes significance as the US market has already slipped into a bear market with the S&P500 down more than 20 per cent from its peak. Incidentally, global equities reacted in an extremely negative manner when the respective markets opened for trading after the S&P500 breached the 20 per cent mark. 

In India, the benchmark indices – S&P BSE Sensex and the Nifty of the National Stock Exchange (NSE) – are already down around 16 per cent when compared to their peaks touched in October last year.  

Simply put, a further fall of just around four per cent would put India in a bear market – an occurrence that negatively affects investor sentiments, fundamentals and even the technical charts that keeps the market moving in a range-bound manner. 

Meanwhile, the co-founder of the country’s largest stock broking firm in terms of active clients further said that the post-lockdown phase saw “insane optimism” in the markets with investors expecting 30-40 per cent returns every year, which is not possible every year. 

“It was never real. I don’t think you can make 30, 40 or 50 per cent in a year kind of returns in the market. Nifty has traditionally done around 11 per cent a year and I think people need to plan their investments around that 10-11 per cent and not the madness of 40-50 per cent,” he said. 

Even in the future if we are able to remain on that 10-11 per cent a year mark, it is not a bad thing, he added.

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