For stock market investors, it is turning bad to worse. The resulting risk-off taking place as the coronavirus epidemic escalates was an unforeseen event just a few months ago. Now with the World Health Organisation declaring it a pandemic, stock markets have entered into bear territory in quick time. In fact, this is one of the quickest collapses of the bull market since the global financial crisis in 2009.

For investors, now the question is how long will this bear run continue.

While the financial crisis was due to a few banks going belly up and the resultant lack of trust in credit markets, the markets took as much as two years to recover. But now the risk to the market is even higher as the potential damage to economies around the world due to the coronavirus still unfurls.

In fact, the outbreak of the coronavirus comes at a time when the Indian economy is growing at its slowest pace in years with the GDP print for the third-quarter coming in at a mere 4.7%.

The market volatility is also heightened by the fact that governments across the world are taking unprecedented measures to stop the virus from spreading. The Indian government just restricted foreigners access to India, sending travel, hotel and airline stocks into tailspin. Besides, shutting down factories and world production to contain the virus adds another blow to the bear market.

This time the bear market may be much different compared to even the 2009 global financial crisis, and some others that hit the Indian markets in the past. Usually, bear markets see a demand squeeze while credit markets do their best to restart the growth engines. But this time, the bear market is more of a supply as well as a demand shock. Besides, experts say, its more of a psychological shock as well.

This is evident from the fact that despite more central banks cutting policy rates, stocks still took a knock into bear territory. The market will be relieved if a cure or a vaccine is found for the coronavirus. Stimulus and other measures will hardly have an impact till we see the infection rate coming down drastically. Hence, this is a bear market more driven by fear than actual economics," said a market expert.

So even as more central banks responded by cutting policy rates, stock markets turned bearish due to a consumption slowdown. For now, much will hinge on when the coronavirus is contained than anything else.

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The anatomy of the new bear market - Livemint