Desi Bhasa me Samzhen jab Stock Pice neeche girta hai to recovery ka percentage jada hota hai

When a stock price falls, the percentage increase required to recover the loss is greater than the percentage decrease that caused the loss. This is because the base value (starting price) changes after a drop.

In URDU

Desi bahasa me pehel samazh len 100 ka cheez ab 50 ka hogya yani 50% kam hogaya. to kiya ab jo yeh 100 ka cheez 50 ka hogya hai yani 50% kam hoa hai to kiya 50% padh jaane se yeh 100 fir se hoga ( 50 ka 50% = 25 total hoga 75 ) nahi hoga bulki sirf 75 hi hoga. Ab 50 se 100 tak safar kerne ke liye usko 50 ka 100% gain hoga tab 100 pahochega. Isi ko neeche details me dekhen. ( If a stock drops from 100 to 50 (-50%), then gains 50%, it rises to 75, not 100. A full recovery requires a 100% gain (not 50%) )

Mathematical Explanation

Example

Let’s say a stock is priced at 100 Rs.

1. Stock Drops by 50%
   • New price = 100−(50%×100)=50100 – (50\% \times 100) = 50100−(50%×100)=50
   • To recover to 100 Rs, the stock must rise by: 5050×100=100%\frac{50}{50} \times 100 = 100\%5050​×100=100%
   • So, a 50% drop requires a 100% gain to recover.
2. Stock Drops by 20%
   • New price = 100−(20%×100)=80100 – (20\% \times 100) = 80100−(20%×100)=80
   • To recover to 100 Rs, the stock must rise by: 2080×100=25%\frac{20}{80} \times 100 = 25\%8020​×100=25%
   • So, a 20% drop requires a 25% gain to recover.

Key Insight

• A 10% drop needs an 11.1% rise to recover.
• A 20% drop needs a 25% rise to recover.
• A 50% drop needs a 100% rise to recover.
• A 75% drop needs a 300% rise to recover!

Why This Happens

When a stock declines, the base price from which future gains are calculated is now lower. So, a larger percentage increase is required to make up for the lost value.

Here is the graph illustrating the relationship between a stock’s percentage drop and the required percentage gain for recovery.

Additionally, here is a table showing the recovery percentage needed for various stock price drops:

Another interesting fact

A 100% drop (zero price) means recovery is impossible. The stock is worthless and cannot recover unless additional capital is injected. See Below;