The correction phases in equities normally reduce the confidence quotient in consensus views. After the 10% correction in Sensex, direction of the next 10% has become more uncertain. We look at the historical comparatives and contextual implications
We have seen 22 Sensex declines above 10% since the start of the previous bull market (2004). On an average, these corrections saw the Sensex decline of 17% lasting over 49 days. From the trough levels, typically index gains were 28% to the next peak over 108 days. What's unusual about the current correction is that it happened after the longest gap of 526 days since the trough of the previous correction
Of the 22 corrections, in nine instances, the Sensex declined above 15%; three around the GFC. 2006-2007 saw two such corrections and 2011-12. The most common link among these major corrections has been the EM-wide nature. Each of these corrections coincided with a double-digit decline in MSCI EM index.
What's unusual about the current correction is that it happened after the longest gap of 526 days since the trough of the previous correction.
