After generating poor returns for nearly 3 years from November 2010 to August 2013, the Indian equity market started rallying September onwards. Mr. Narendra Modi was nominated as the prime ministerial candidate in September by the Bharatiya Janata Party (BJP). On formation of a stable Government, rally got extended in May. Many experts believe it is not just the knee-jerk reaction of the market but the beginning of a new bull market. It has been more than 200 days since the rally began in September 2013. Although markets touched all time high and crossed the 26,000 levels on S&P BSE Sensex, the move has been slower than that experienced in first 200 days of the bull phase in 2009.

How much you would have earned in first 200 days of bull phases?

Data as on July 07, 2014
(Source: ACE MF, PersonalFN Research)
Note: Bull phase of 2013-14 is still under progress

As depicted in the graph above, the previous bull phase had started on March 09, 2009. During the first 200 days, S&P BSE Sensex generated about 117% returns. But in stark contrast to this, in the on-going bull phase, Sensex has gone up only about 39%.

But comparing two bull phases only on the basis of returns generated by the index may not be conclusive. PersonalFN is of the view that, it is vital to also consider the market valuations. The rally of 2009-10 had started after one of the worst bear phases was over. Market valuations were multi-year low and market outlook looked promising after UPA government came to power once again in May 2009, after successfully completing its first term. In 2009, even after running 40%, markets were not as expensive as they are today which thus allowed investors comfort to buy aggressively. Similarly, during the bull phase of January 1991 - April 1992 and during another bull phase of October 1998 - February 2001, the Indian equity market had generated more than 100% returns in first 200 days. Such re-rating hasn't happen this time.

So are we in a multi-year bull run?

Many experts and savvy investors are optimistic that this could be just a start of a multi-year bull market. However, PersonalFN is of the view that, it would be too early to term it so. The last bull market phase persisted for just about 18 months (From March 2009- November 2010) since it was cyclical in nature i.e., it mainly happened because markets went too below their fundamentals. It is said that, the current bull market rally has more to do with structural changes that may put India again back on the growth path. The Indian equity market is ascending on the hope that the NDA Government will bring in positive changes.

And during such structural shifts, PersonalFN is of the view that as an investor it is important for you to analyse the performance of stocks or mutual funds you hold across market phases. PersonalFN believes you should stay invested only in those equity oriented mutual funds which have a long term track record of performance. Ideally a fund should fall lesser than its benchmark in a bear phase and generate an alpha in the bull phase. While rating mutual funds, PersonalFN gives due weightage to this parameter and many more quantitative and qualitative parameters. This brings out PersonalFN's unbiased and independent approach in mutual fund research, which has helped several investors to create wealth through PersonalFN's mutual fund research services.

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