Stock market crashes in India

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Since the beginning of the Bombay stock exchange, stock markets in India, particularly the Bombay Stock Exchange and National Stock Exchange of India have seen a number of booms as well as crashes. [1]

Contents

This page lists these crashes and sharp falls in the two primary Indian stock markets, namely the BSE and NSE. [2] Financial Times [3] terms a double-digit percentage fall in the stock markets over five minutes as a crash, while Jayadev et al. describe a stock market crash in India as a "fall in the NIFTY of more than 10% within a span of 20 days" or "difference of more than 10% between the high on a day and the low on the next trading day" or "decline in the NIFTY of more than 9% within a span of 5 days". [4] As per the latter definition, the Nifty experienced 15 crashes during the period 2000 to 2008 with a number of them having occurred in the months of January, May and June 2008. [5] According to SEBI, approximately 89% of individual stock traders in the equity Futures & Options (F&O) segment incurred losses during the financial year 2021–22. [6] [7] [8]

The crash of 1865

As per the Business Standard , India experienced its first stock market crash in 1865. [9] Although the Bombay stock exchange had not yet been formed, Gujarati and Parsi traders often traded shares mutually at the junction of Rampart row and Meadows Street. In the preceding years, speculation about the results of the American Civil War had led to irrational increases of stocks of new Indian companies. Shares of the Back Bay reclamation (face value Rs. 5,000) touched Rs. 50,000 and those of Bank of Baroda (face value Rs.50000000) touched Rs. 29,00,050. Money made from cotton was pumped into the stock market driving prices of stocks higher. Banks loaned money to speculators further fueling the bull run and wealthy merchants like Premchand Roychand dispensed advice that led to ordinary people placing their bets on shares. [10]

On 16 November 1864, the governor warned civil servants not to participate in the current frenzy. New companies were floated with new share issues publicized in the newspapers. Forward contracts further promoted speculative purchases. However, the market crashed in May 1865 when the civil war ended, causing cotton prices to fall. Shares of the Backbay reclamation fell by 96% to under Rs. 2,00,000 and a number of merchants including Behramji Hormuzjee Cama went bankrupt. [11] The crash not only led to a dwindling of the financial fortunes of many, it also led to a decrease of the city's population by 21% due to the closing down of many enterprises. [12] [13] On 1 July 1865, when hundreds of "time bargains" had matured (as the future contracts were then known), buyers and sellers alike defaulted leading to the burst of the bubble. A share of Bank of Bombay which had touched Rs 2,850 at the peak of the market slumped to just Rs 87 in the aftermath of the bust. [14]

Crash of 1982

In 1982, the bear cartel of Bengal started short selling shares targeted primarily of Reliance. Stocks around 110,0000 was short sold. The value of shares decreased significantly. The BSE was shut down for three consecutive days.[ citation needed ]

Crash of 1991

After economic liberalization in India in 1991, the stock market saw a number of cycles of booms and busts, some related to scams such as those engineered by players such as Harshad Mehta and Ketan Parekh, some due to global events and a few due to circular trading, rigging of prices and the irrational exuberance of investors leading to bubbles that finally burst. [15]

Crash of 1992

On 28 April 1992, the BSE experienced a fall of 12.77% – due to the Harshad Mehta Scam. [16]

UPA 1 election crash of 2004

On 17 May 2004, the BSE fell 15.52% – its largest fall in history (in terms of percentage).

Crash of 2006

On 18 May 2006, the BSE Sensex fell by 826 points to 11,391. [17]

Crashes of 2007

During the 2007–2008 financial crisis, the stock markets in India fell on several occasions in 2007 as well as 2008. In 2007, there were five sharp falls in the stock markets.

Crashes of 2008

14,809 – a fall of 951 points.

Crash of 2009

On 6 July 2009, the Sensex fell by 869 points to 14,043.

Crashes 2015

Crashes of 2016

The stock markets in India continued to fall in 2016. By 16 February 2016, the BSE had seen a fall of 26% over the past eleven months, losing 1607 points in four consecutive days of February. The reasons given for this included NPAs of Indian banks, "global weaknesses" and "global factors". In the four months from November 2015 to February 2016, FIIs were reported to have sold equities worth Rs 17,318 crore as, in the opinion of analysts, concerns grew over growth in China and as crude oil prices tumbled below $30 per barrel [28]

On 9 November 2016, crashed by 1689 points, believed by analysts to be due to the crackdown on black money by the Indian government, resulting in frantic selling. The Sensex nosedived by 6% to 26,902 and the Nifty dropped by 541 points to 8002. These were said to be due to the demonetization drive by the Modi government. The Hindu was of the opinion that the weakening rupee and the US presidential election too had some bearing on the behavior of investors. The fall was concurrent with falls in other Asian stock markets including the Hang Seng, Nikkei and the Shanghai Composite. The S&P had also fallen by 4.45%. [29]

Crashes of 2018

Crashes of 2020

On 1 February 2020, as the FY 2020–21 Union budget was presented in the lower house of the Indian parliament, Nifty fell by over 3% (373.95 points) while Sensex fell by more than 2% (987.96 points). The fall was also weighed by the global breakdown amid coronavirus pandemic centered in China. [35]

On 28 February 2020, Sensex lost 1,448 points and Nifty fell by 432 points due to growing global tension caused by COVID-19 pandemic, [36] which W.H.O said has a pandemic potential. [37] Both BSE and NSE fell for the entire five days of the week ending with the worst weekly fall since 2009 [38]

On March 4 and 6, markets fell by around 1000 points and several crores of wealth was wiped out. On 6 March 2020, Yes Bank was taken over by RBI under its management for reconstruction and will be merged with SBI. This was done to ensure smooth functioning of the bank as it was struggling for couple of years to cope up with heavy pressure due to cleaning of bad loans.

On 9 March 2020, the Sensex fell by 1,941.67 points, while Nifty-50 broke down by 538 points. The fear of COVID-19 outbreak has created havoc all over the globe and India is no exception. Further, the recent Yes Bank crisis also made the markets fell. [39] The markets ended in red with Sensex closing on 35,634.95 and Nifty-50 on 10,451.45.

On 12 March 2020, the Sensex fell by 2,919.26 points (−8.18%), the worst continuation of the week in the history while Nifty-50 broke down by 868.2 points (−8.30%) amid World Health Organization (WHO) declaring Coronavirus outbreak as "pandemic". [40] Sensex ended to 33-month low of 32778.14. [41]

On 16 March 2020, Sensex plunged by 2,713.41 points (around 8%), the second worst fall in its history. On the other hand, Nifty ended below 9200–mark at 9,197.40 due to global economic recession. [42]

However, the Sensex continued to fall straight for four–continuous days till 19 March 2020, losing 5815 points during the period.

On 23 March 2020, Sensex lost 3,934.72 points (13.15%) and Nifty plunges 1,135 points (12.98%) at 7610.25 [43] as coronavirus-led lockdowns across the world triggered fears of a recession. These are now the lowest levels since 2016. It's witnessing the biggest weekly loss since October 2008, as the increasing number of coronavirus cases in India as well as globally. [44]

Crash of 2024

After the 2024 general election, stocks crashed. [45] [46] Nifty fell from 23,263.90 on June 3rd to 21,884.50 on June 4th (a crash of around 1380 points (5.93% decline) but had recovered to 24141.95 by July 1st. "Speaking on Nifty's remarkable monthly performance post-Lok Sabha elections, Sugandha Sachdeva, Founder of SS WealthStreet, said, "Nifty has posted impressive returns of over 11% one month after the election outcome, significantly surpassing gains seen in previous election years dating back to 1999. After experiencing a sharp decline on the election day, the benchmark index quickly recovered and surged to new record highs of 24401, rewarding investors with substantial returns." [47] The primary reason for the significant market downturn was the unexpected outcome of the 2024 general election. While many anticipated that the Bharatiya Janata Party (BJP) would secure over 400 seats, as suggested by exit polls, the actual results were markedly different, with the BJP winning approximately 200 seats. This discrepancy contributed to the most substantial market crash in the past four years.

Stock market performance: Chart analysis

See also

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