It's been five months since the market hit its bottom and Indian equities have recuperated phenomenally by nearly 51 per cent. All thanks to the gushing liquidity in the markets and increased retail participation. This has been by far the best recovery posted by the headline index, Nifty50, in years. It has grown 22 per cent and 38 per cent in one month and three months periods, respectively, from its lows.
Historically, markets rebounded the most in 3-6 months after a sharp correction. The closest recovery of this magnitude has been in six months' time when the index scaled almost 46 per cent after it fell nearly 30 per cent in just 35 days from its peak in May 2006. It had shown a recovery of 19 per cent and 29 per cent over one- and three-months period.
In five other instances, the increase was 35 per cent and above in six months period from the dips.
The recovery is broad-based indeed as the Nifty Midcap 100 index jumped around 56 per cent and the Nifty Smallcap 100 index delivered a stupendous show with 71 per cent returns in past five months. The 50-stock index, is currently trading just 7.2 per cent below its peak.
A closer look at the data of periods when the Nifty 50 declined over 20 per cent from its highs shows that the 38 per cent correction in March this year was the third major when the coronavirus stung the Indian financial markets very hard. During the period between the peak and trough of January and October 2008, the index suffered the biggest fall of 60 per cent followed by a phase between February and September 2001 when it crashed around 40 per cent.