The Indian stock market has fallen 39 percent from its recent record highs hit in January 2020 amid this coronavirus-led selloff. In conventional terms, a bear market is defined as one where prices on leading indices fall by 20 percent and more.

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Using this framework, Morgan Stanley has noted that the Indian stocks have been through four bear markets in 25 years, or since foreign investors became actively involved with Indian equities, including the ongoing one.

As per the global brokerage firm, the first takeaway from history is that all four bear markets were caused by global factors.

The History

The first of these four bear markets was in 1997-98, triggered by the Asian Financial crisis preceded by the Russian debt default. India's balance sheet was in good shape and was actually not part of the crisis.

The second one was the bursting of the tech bubble in 2000-01 which culminated with the terrorist attacks in the US. While India witnessed some collateral damage in the software services sector, this was primarily a US-centric bear market.

The third was the global financial crisis (GFC) in 2008-09. Indian banks were unaffected because they mostly did plain vanilla lending yet India felt the crisis through its capital account and the stock market was among the worst performers globally.

The fourth one has been driven by the COVID-19 virus, which has yet to directly affect India on a significant scale, albeit things could change quickly as India could be entering the community spread phase of the virus.

Why this one is different from the others?

Morgan Stanley states that the pace of the fall of the ongoing market is about three times more than the bear market during the GFC, which itself was higher than previous bear markets.

It offers two reasons for this pace: a) there is no precedent for what is happening today; and b) events have unfolded at a rapid pace.

"This bear market is only two months whereas bear markets generally last at least 6 months. Given the pace of the decline, it may not be following the past average duration. The price decline of around 40 percent also leaves some more downside risk on the table when compared with past bear markets," the brokerage stated.

The rate of change in volatility needs to drop for investors to be sure that the bear market bottom is behind us. Compared to previous bear markets, volatility could rise further but the second-order is at an all-time peak, it further said.