The stock market is like a sea with waves of all shapes and sizes. While some waves are good, others may be devastating. Millions of investors enter the stock market every year, but only a handful make profits. Stock market crashes are awful enough to wipe away the profit of a decade within a few days. Knowledge of stock market crashes can help you plan your trades properly, as all stock market crashes in India have one thing in common - they give you a prior indication. Read on to learn more about the five worst stock market crashes in India in this detailed throwback article.
Five Worst Stock Market Crashes in India - A Detailed Analysis
1. March 2020 - COVID Panic
You can seldom find any investor or trader in India who doesn’t know about the COVID crash in March 2020. On this unfortunate day, investors became poorer by INR 13.88 trillion. On 23rd March, the Sensex shed off over 13% or 3,935 points, and the Nifty fell by 13% or 1,135 points. What’s even more appalling is the fact that VIX or volatility index rose to 71.56, a jump of 6.64%. The market sentiment was so bad that of the 2,401 stocks regularly traded on the BSE, 2,036 stocks declined, and 233 advanced.
The market fell on that day because the Indian government declared a nationwide lockdown on and from 23rd March. The fear of the economy coming to a standstill gripped the market. Almost all major large-cap stocks dropped over 15% that day.
The bloodbath was not limited to a single day. The downward journey went on for many days. During the period, the Sensex dropped from the level of 42,273 to 28,288 in one week.
Hence, the COVID crash figures prominently in all lists dealing with the market crash in India.
2. June 2015 to June 2016 - Yuan Devaluation and Brexit
The period from June 2015 to June 2016 can be termed as one of the worst market crashes in India and the world. The year-long selloff began with the negative GDP news from China, the devaluation of the Yuan, petroleum price fall, and Greek debt default. What started in 2015 went on till 2016 when bond yields saw a sharp spike amidst the Brexit issue.
On 24th August 2015, Sensex dropped 5.94%, wiping out nearly INR 7 lakh crore from the Indian market. And, during April 2015 and February 2016, Sensex had shed off over 26%.
3. November 2020 - Demonetisation and US Election Trends
The announcement of demonetisation (banning 500 and 1000 denomination notes) and Donald Trump getting an early lead prompted investors to hit the sell button in panic on 9th November 2016. In one of India’s worst-ever market crashes, Sensex nosedived 1,688 points or 6.12%, while Nifty crashed by more than 540 points or 6.33%.
The government suddenly announced that INR 500 and 1000 denomination notes would not be accepted in India from 9th November onwards. The government took the decision to curb the black money menace. To add to the market’s woes, reports coming from the US suggested that market-favoured Hillary Clinton was fast losing ground to Donald Trump. These two incidents gave a severe blow to investor sentiments as they pulled away most of their money.
The shares of conglomerates like Adani Ports, M&M, Bharti Airtel, ONGC, Bajaj Auto, ICICI Bank, Hero MotoCorp, Cipla, Sun Pharma, and HDFC Ltd fell by over 5.50 points each. Most real estate majors like DLF, Godrej Properties, Sobha Developers, Unitech, Indiabulls Real Estate and HDIL tumbled by over 15%.
Globally, crude oil prices dropped to below 45 levels after shedding off 2.65%.
4. March 2008 - US Financial Crisis
On 17th March 2008, the Indian market suffered the worst crash. The Sensex spiralled down 950 points (6%), forcing the index to settle below 15,000. Just two weeks before this date, the market fell by 900 points.
The crash was triggered by the US financial crisis, touted as the worst financial disaster after The Great Depression. The financial crisis was a fallout of the housing bubble in the US. Although the incident was in the US, its ripple effect left all global indices to fall like a pack of cards.
The impact of the US financial crisis was so bad that between 2008 and 2009, the Indian market lost 50% of its value from the highs.
5. April 1992 - Harshad Mehta Scam
On 29th April 1992, Sensex dropped 570 points or 12.77%, and investors withdrew over INR 35 billion. The market fell after the 5000-crore scam perpetrated by Harshad Mehta came to light. He was the most popular broker of his time with a clientele comprising the who’s who of India. This securities scam not only made his clients poor, but millions of investors investing in the stock market lost their life’s savings.
Within a short span of this incident, the market lost nearly 40% of its combined market value. The after-effects were long-lasting and ordinary investors lost their confidence from trading, prompting the government to form new laws and committees to contain the damage.
If you take a look at the worst market crashes in India, you may feel apprehensive about investing in the stock market. But, when you look at the success stories, you can feel motivated again. As a fact, when the market falls, it gives an indication. If you are an informed investor, you must understand the clues to take remedial steps.
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