{"id":27881,"date":"2023-08-04T11:41:35","date_gmt":"2023-08-04T06:11:35","guid":{"rendered":"https:\/\/fundsindia.com\/blog\/?p=27881"},"modified":"2023-08-04T21:05:00","modified_gmt":"2023-08-04T15:35:00","slug":"is-there-a-higher-risk-of-a-large-fall-when-the-equity-market-reaches-an-all-time-high","status":"publish","type":"post","link":"https:\/\/www.fundsindia.com\/blog\/mf-research\/is-there-a-higher-risk-of-a-large-fall-when-the-equity-market-reaches-an-all-time-high\/27881","title":{"rendered":"Is there a higher risk of a large fall when the equity market reaches an all-time high?"},"content":{"rendered":"\n
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\u201cGiven the sharp run-up in recent weeks, I feel the risk of a large market fall has increased. Should I redeem my equity investments to avoid loss?\u201d<\/em><\/p>\n\n\n\n

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If you had similar thoughts, welcome to the rest of us!<\/p>\n\n\n\n

While it feels exciting to see equity markets go up, there is always a lingering sense of anxiety that they might come crashing down anytime.<\/p>\n\n\n\n

I have used the word \u2018crash\u2019 here deliberately because most of us are not bothered by smaller declines where equity markets fall 10-20%.<\/p>\n\n\n\n

In fact, going by the last 30+ years of Nifty 50, 10-20% falls happen almost each and every year<\/strong>1<\/sup> and cannot be avoided.<\/strong><\/p>\n\n\n\n

Our concern is usually more on the larger market declines (read as falls greater than 20%). <\/p>\n\n\n\n

With the equity markets making new all-time highs in the last two months, every small decline feels like the start of a large fall. <\/strong><\/p>\n\n\n\n

But is this really the case?<\/p>\n\n\n\n

Do all-time highs actually increase the odds of a large market decline?<\/strong><\/p>\n\n\n\n

Let us find out!<\/p>\n\n\n\n

First, let’s check the historical odds of a 20% fall happening in the next 1-2 years following normal (non-all-time-high) days…<\/span><\/strong><\/h4>\n\n\n\n

Assuming your portfolio value was Rs 100, here is the percentage of times the equity market fell over 20% (read as portfolio value dropped below Rs 80) in the near future.<\/p>\n\n\n\n