SHARETIPSINFO >> Articles Directory >>Concept of bull market and bear market in Stock market India
You must have heard of the famous Bull Market of US in the 1990s which was the longest in finance history and financial markets worldwide. During this phase most of the financial markets achieved a whopping growth rate and investors achieved more than ever. Bull Market is a term often used to describe the stock market which has rising prices as its main characteristics. In fact, it is just the opposite of bear market. It is mainly aimed at increasing investor’s confidence and to motivate investors to purchase much more than before in expectation of further gains in capital terms.
Another common term used in Bull Market is ‘herd,’ which is used for a large group of market participants or investors in the financial market. Bull Market is also termed as Bull Run. Bull Market is basically financial market for a specific group of securities in which prices would expectedly rise. Other than financial markets, it can also be used for trading in bonds, mutual funds, commodities, currencies, shares and securities etc. Bull Market is strongly characterized by strong optimism, investor’s belief and growing expectations of continuous growth and profits. But the one thing that should be kept in mind is that, like all other markets bull market does not lasts forever as no market can last forever. And it is almost unpredictable as to when the bull market may end.
The task becomes all the more predictable because of continuous speculation and psychological effect. It plays a very important role in various trends in the market. In fact, it often results in either stock market ‘bubble’ or ‘crash’ which are the two extremes for any market. The term “Bull Market” is derived from the way a bull attacks its opponent that is by thrusting its horns up in the air. So, if the market trend is on a rise, then, it is named as Bull Market. In fact, a person who expects prices to rise and invests in the market on this assumption is commonly referred as ‘bull’.
Another characteristic of bull market is that the number of buyers is far more than sellers. You have to very cautious while dealing in stock market as people tend to invest more in this trend. If you are inexperience in such deals, then, you must not try to hold back selling in expectation of more profits as you may end up losing money if the market crashes. It is very obvious that like all other trends a bull run may stop and the share prices reverse their direction. Thus, Bull Market is a very important constituent of share market and financial management.
Bear Market – Alarms A Fall In Economy
Economy and financial market are closely related. A rise or fall in the financial market will affect the economy of the state. In fact the economic conditions of the nation are better expressed in connection with the financial market status. You might have come across the term bear market and bull market in the financial sectors. These terms are often used to describe the economic conditions as in connection with financial market.
When the financial market is increasing in terms of value, the economy is usually referred to as bull market. In other words, it refers to a rising market. Here the investors act with an optimistic mentality. There is an expectation of making profit and hence people start investing without a fear of declining market. Bear market is a condition which speaks about a reverse or opposite condition. It is the economic conditions which exist when the financial market is decreasing in value. When the financial market faces a rapid decline, the economic conditions decrease as well and are known by the term bear market.
When bear market continues in the economy, there is a high chance of economic depression. The bearish market alarms a danger signal for the investors as well as the public. This causes a pessimistic attitude in the investors. In fact this pessimistic attitude is the best indicator of a bear market. The investors start exhibiting a conservative nature.
The investors start making investments with ultimate care. Bear market has impacts and reflections on more than one market. When the declination is felt in a single market, it cannot be referred to as a bear market. But it can be considered as the initial stages of a bear market.
When a bear market is suspected, people start selling their stocks. They aim at making a profit when conditions favor. There are people who are ready to take risks. They try to sell borrowed stocks. Here what they target is buying back the stocks when the price is low. This is made on an assumption. But this is a dangerous decision as it can put them in trouble if the market is not working as per their pre assumptions.
Bear market can alarm the beginning of a recession. There can be severe unemployment prevailing in the state when a recession starts. A rising inflation follows. The value of housing falls below average. Stagflation economy can trigger a bear market.
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