Thread by @deepakvenkatesh

1/n How painful is the current drawdown investors are seeing. A small thread on the topic

My objective was to look at 3 things essentially

How far does the portfolio fall?
How long does it stay in the dumps?
How fast does it fall?

Taken Nifty50 as the portfolio since 1 Jan 99

2/n There are only 3 blocks of period in which Nifty has gone below a drawdown on maximum terms of below 30% since 1 Jan 1999

Dotcom - Period roughly from Feb 2000 to Dec 2003
GFC - Period roughly from Jan 2008 to Oct 2010
Covid - Period roughly from Mid Jan 2020 to present

3/n Dotcom period

How far does the portfolio fall
Max DD was 51%

4/n Dotcom period

How long does it stay in the dumps
The overall drawdown was for over 960 days!

How fast does it fall
It took a long time of 19 months to reach Max DD

Therefore the pain was elongated and slow in this period.

5/n GFC period

How far does the portfolio fall
Max DD was 60%

6/n GFC period

How long does it stay in the dumps
The overall drawdown was for over 670 days approximately
image

How fast does it fall
It took 9 months to reach Max DD of 60%

7/n GFC Period

The pain is extreme in this instance where in the whole drawdown period almost 15% of the times the portfolio is 50% or more down!

8/n COVID Period

How far does the portfolio fall
Max DD is 39% as of now

9/n COVID Period

How long does it stay in the dumps
Too early to say. Its been less than 60 trading sessions only so far

10/n COVID Period

How fast does it fall
The pain in this case is the speed of fall. In 46 trading days the portfolio was down over 30%. Why we are getting pinched this time is because this speed has happened only once before that was for a very few days in Oct & Nov 2008.

11/n

Therefore in the current period the experience of a swift fall is equivalent to only the peak of the GFC crisis.

This is the 'painpoint' for us now.

Source: NSE data. Manually done so there could errors of a few bps here and there.