Why Monday brings fear in Bear market

The bloodbath is going on in the Indian Stock Markets. After the great rebound from the Lower circuit in 13^th March, 2020 (-10%), Nifty opened with a huge gap down and got sold on every rise that confirmed bears are driving the market now. 

Bears aggressively gripped the market, thus Nifty plummeted by a nerve-rattling 757 points or 7.61%. This is one of the largest fall in a single day ever witnessed in the history of the Indian stock markets in terms of points till that day.

The financial fallout is due to the rapid spread of the Corona Virus which is fast and furious. The spread of the deadly virus around the globe has locked down economic activity in countries like China, Italy and Iran. We have also witnessed the rising case in Spain, the USA and India.

This has allowed economists and Share Market experts to promote recession. People have started travelling less, avoiding public places and public functions that have curtailed the spending. 

The plunging Nifty50 – which was down by more than 750 points in trading Monday, 16^th March 2020 - is a symptom of a battered market trying to handicap how bad the Corona virus-led hit to the economy will be.

A drumbeat of negative news about the spreading virus in India and the USA, hurts the economy, which led to heavy selling on Monday, 16th March 2020 thus Nifty settled below 7.61%. This indicates a clear bear market around and it is the first and fast bear market since the financial crisis 2008.

The market has witnessed the manic sell-off on Mondays during the 2008 crisis and it seems 2008 is again here, but the speed of the selling is like the supersonic, perhaps algos are making it fast and furious. Some of the biggest fall has come on basically on Monday, historically.

The History of Manic Monday

Monday, 17^th May, 2004 - Trading was suspended in the market for an hour as the market hit the lower 10% circuit. The crash followed a statement by Central Board of Direct Taxes seeking to dispel suggestions that its draft circular was ambiguous.

Monday, 22^nd May 2006 - India's main stock exchanges halted trading for an hour with the Sensex falling 10.2 per cent to 9,826.91 points as brokers dumped stocks held on clients' behalf to cover margin requirements.

Tuesday, 22^nd Jan 2008 - Indian shares tumbled almost 11 per cent - Trading has been halted till 11 am. Though it was Tuesday, but big sell-off was continued from Monday 21^st Jan 2008.


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The latest lower circuit that we have witnessed was on Friday 13^th March but Nifty closed in the green zone. On Friday, It was like all bad is over, but we saw a new game of selling today, we would not be surprised much if we get another lower circuit tomorrow as global cues are weak.

If we revisit the circuit filter, we find that two Mondays have Lower Circuit and one Monday has helped to get a lower circuit on Tuesday.

If we revisit the circuit filter, we find that two Mondays have Lower Circuit and one Monday has helped to get a lower circuit on Tuesday.

2008 was a bear market and we have witnessed a huge sell-off on Mondays. Check the graph.

Mondays at 2008

Mondays at 2008

One can notice many gap downs on Mondays in 2008. This was due to the negative news development. However; we cannot compare 2008 with 2020 as 2008 was a financial crisis and 2020 is a black swan event created by the fear of Corona Virus.

What’s a bear market?

It is a period of declining stock prices in which a broad market gauge like the Nifty50 falls at least 20% from a prior high. Bears normally are caused by a recession, black swan events like coronavirus, wildly optimistic investors,  ridiculously overpriced stocks or interest rate shocks that cause economic contractions. These are normally accompanied by rising investor fear levels as losses mount.

Why Mondays are so furious during the Bear market?

Perhaps, the reason behind this is that the negative news builds up during the weekend creates panic in investors - fearing weak fundamentals and high volatility. Many of the Lower circuit recorded on Monday, doesn’t mean Monday is bad, it means chances are high to be down during the bear markets.

Same thing we witnessed this Monday as well, the Corona cases increase during the weekend that have been reflected in sell-off. With the Bounceback on last Friday, many people were shouting Bottom has been created.

However; I believe, it is impossible to predict the bottom of the stock market and how far the stocks may fall. The uncertainty is growing over Corona Virus accompanied by the India VIX. It is rising day by day, now at 59. Volatility has been highest ever in the decade. As long as Volatility keeps rising, no investor is going to put money in the market as they hate volatility. We may get the first sign of reversal or bottom from Volatility. If it starts cooling off, then we may step up towards bottom-up. As of now, everything is in a vogue. High volatility has made the day trading the most difficult to sail on.

If the cases of Corona Virus start disappearing from India and the USA, could be turned as the big boost for the market. Apart from that, the peak of panic selling may also bring some buying in the market. Once, we reach to the peak of the panic sell-off, everybody starts thinking of selling, could be the time of a good buying opportunity. Also, if investors get good stocks at good value price they may dare to buy and support the market. How long should you wait for investing? The answer lies in the cooling-off the Volatility. 

Monday 23rd March 2020 - Nifty close below almost 13% (-1135 points) - the biggest fall in the history of Indian Share Market. Indices got a lower circuit and trading halted for an hour. 

Do you think about the Monday Sell-off? Post your comment in the Comment box.


Chart Credit: Subhadip Nandy