A bear market is the point at which a market encounters prolonged price falls. It depicts a condition wherein prices of stocks fall 20% or more from ongoing highs in the midst pessimism and negative sentiment from trader.
Bear markets are frequently connected with declines in the overall market or an index like the Nifty 50, but individual stocks can likewise be viewed as in a bear market in the event that they experience a decline of 20% or progressively over a continued period of time, usually 2 months or more.
Bear markets likewise may occur with general economic downturns like a recession. Stock prices for the most part reflect future expectations of cash flows and profits from companies. As development possibilities wind down, and expectations are low, prices of securities can decrease.
Herd mindset, fear, and a urge to prevent heavy losses may result in depressed resource prices for a long periods of time.
One definition of a bear market states that bear markets occur when stocks, on average, witness a decline of at least 20 percent off their high. The point here to be noted is that 20 percent is just a random number, the same way 10% fall is a random benchmark for a correction.
The period when investors are more risk-avoiding than risk-taking can also be another definition of a bear market. This sort of bear market can keep going for quite a long time like for months or years.