When dealing with the stock market, expect the unexpected. As a result, there have been periods when markets collapsed, resulting in rapid financial losses for those who had invested. The standard definition of a crash is a sudden drop in index values by at least 10%. Although market conditions have constantly improved, the effects of a crash can linger for quite some time.
This article will examine past stock market crashes in India, both well-documented and less so.
The stock market crash of 1865
In 1865, the Indian stock market saw its earliest documented fall. In those days, India did not have a regulated stock market. However, at the intersection of Rampart Row and Meadows Street, merchants of Parsi and Gujarati ethnicities would engage in cross-cultural trade. Stock prices of Indian cotton enterprises rose while the American Civil War raged on, reflecting the commodity’s increasing value.
Profits from the upswing were pumped into the stock market, sparking a buying and selling frenzy and a rise in the volume of speculative deals. Speculation reached its height as the Civil War concluded, causing a precipitous drop in cotton prices and demand. All buyers and sellers alike defaulted, making this the first time this has ever happened in the stock market.
Stock Market Crash of 1982
In 1982, the Bengal bear cartel started selling short Reliance Industries shares. Stocks worth about $110,000 were shorted. This stock’s value has plummeted. For three days in a row, the BSE was disabled.
Stock Market Crash of 1991
The Indian stock market has seen several booms and busts since economic liberalization took place in 1991. Some of these cycles can be traced back to scams by significant players like Harshad Mehta and Ketan Parekh. In contrast, others can be traced back to circular trading, price rigging, and irrational investor exuberance, all leading to bubbles that eventually burst.
Stock Market Crash of 1992
The stock market fall of 1992 is often regarded as the most infamous. About Rs. 5,000 crores was involved, making this the first time a significant scam had affected the Indian stock market. Mr. Harshad Mehta’s well-organized security scam contributed to the 1992 market collapse. BSE fell sharply, by almost 12%. As a direct outcome of the hoax, a two-year bear market ensued. It was one of the worst times for the Indian stock market and cost the banking industry billions of rupees.
Stock Market Crash of 2004
With the unexpected demise of the NDA government in 2004, Sensex fell by 15.52%. The percentage drop is the greatest in the history of the Indian stock market. Institutional investor UBS, fearing political uncertainty, sold shares after the government’s collapse.
Stock Market Crash of 2008
Fears of a recession in the US markets and other factors such as falling interest rates, a loss of investor confidence, the selling of shares, and the exit of FIIs and foreign hedge funds from hazardous emerging countries led to another dark time in the Indian stock markets. Continuous declines in the stock market were seen throughout the year, and it was in September 2010 that the market recovered to its pre-crash levels.
Stock Market Crash of 2015
After a relatively continuous period beginning in the fall of 2008, the markets plummeted again in 2015 against the backdrop of a slowing Chinese economy. An 8.5% drop in Shanghai’s stock market prompted a similar decline in India’s financial markets. Along with the weak monsoon, the dismal earnings of large Indian corporations and management uncertainties also contributed to the fall.
Stock Market Crash of 2016
The Indian stock markets have dropped by almost 26% over 11 months by the beginning of 2016. The rise in nonperforming loans at banks, the decline in oil prices, the slowdown of the Chinese economy, and the widespread lack of strength and investor confidence were all contributing factors.
In addition, the announcement of demonetization in 2016 triggered yet another market crisis the same year. The Sensex fell by an enormous 6%, and the Nifty by 541 points. Many contributing factors to the catastrophe, including the demonetization campaign, the US presidential elections, and a widespread decline throughout major Asian stock markets (Hang Seng, Nikkei, and Shanghai Composite).
Stock Market Crash of 2018
Though not technically a crash, the BSE and NSE fell significantly from February 2-5, 2018, when the Finance Minister announced in his budget his intention to institute a 10% long-term capital gains tax (LTCG).
The BSE Sensex fell 600 points in two days on the 5th, and the Nifty 50 fell 400 points in the same time frame, closing at 10,676. On February 2nd, the BSE Sensex plunged 570 points to 35,328, and the NSE Nifty fell 190 points to a low of 10,826.
Stock Market Crash of 2020
The 2020 stock market crash was the most recent significant drop in Indian stock markets, and it was caused entirely by the Chinese-originated Cononavorus Pandemic. For five days straight, stock prices went down, marking the worst drop since the 2009 meltdown. A significant wealth wipeout occurred as a result of the plunging markets caused by the epidemic and the potential fall of Yes Bank. Despite the widespread panic the epidemic caused, the stock markets have recovered and show signs of further gains.
Conclusion
Stock markets have had multiple crashes over the years, and these have occurred for many different reasons. Numerous events and conditions can affect stock markets, including wars, broker cartels, political instability, banking crises, government policy decisions, and health concerns.
