Why study crashes
Crashes are when the method is tested hardest. Everything falls together, the news is frightening, and every instinct says either "sell everything" or "buy everything, it's cheap". Stage analysis says something calmer: watch how many stocks are rising, and let that number tell you when the tide has turned.
Here are the two biggest crashes in our records, through the share of NSE stocks in Stage 2.
2008: fast down, a year at the bottom, fast up
Three things stand out.
The top gave little warning. At the January 2008 high, breadth was strong. Unlike 2018 or 2024, this was not a narrow market hiding weakness — the selling simply arrived all at once.
The bottom was long and flat. From March 2008 to April 2009, few stocks were in Stage 2. Anyone trying to buy the bottom had a year of false dawns to survive, including a brief rise to about 14% in June 2008 that came to nothing.
The turn was unmistakable. In the spring of 2009, stock after stock broke out of its base. By early July, nine in ten NSE stocks were in Stage 2 — one of the broadest readings in our records — while the Nifty was still almost 30% below its old high. You didn't need to catch the October low or the March retest. You needed to notice when the market underneath had changed.
2020: a weak market, then a crash, then the broadest rally
This time the warning came first. At the January 2020 record, only about a quarter of NSE stocks were in Stage 2 and fewer than half were above their 200-day average — the index was being carried by a few large names.
Then the fall, and one of the fastest recoveries in our records. The index bottomed in early April; breadth two weeks later. By the end of August, half the market was back in Stage 2 with the Nifty still below its pre-crash high. The leaders of that recovery were visible early: health care first, then IT — the rotation you saw in lesson 4.
What the two crashes teach
- Breadth doesn't pick the day. In 2008 it stayed near zero for a year; in 2020 it bottomed two weeks after the index. Neither low could be called in real time.
- A washout is followed by a rush. Both times, the share of stocks in Stage 2 went from almost none to most in a matter of weeks. That rush is the signal — not a prediction, a description of what buyers are already doing.
- Protect first, then rebuild. A stop under the 30-week line took you out early in both falls (lesson 7). Breakouts in a broadening market brought you back in (lesson 6).
The share of stocks in Stage 2, the share above their 200-day average, and the market read — updated after every close.
Questions people ask
How much did the Nifty fall in 2008?
About 59% from its January 2008 high to its October 2008 low, on weekly closes. The share of NSE stocks in Stage 2 fell from about 70% to under 1%.
How much did the Nifty fall in the 2020 Covid crash?
About 35% from its January 2020 high to its low in early April 2020, on weekly closes. Fewer than 4 in 100 NSE stocks were in Stage 2 at the worst point.
Can market breadth tell you the exact bottom?
No. In both crashes breadth stayed near its lows for weeks or months after the index bottomed. What breadth does well is show the turn once it has started — stock after stock entering Stage 2 — while the index is still well below its high.