Quoting Warren Buffet, “Risk comes from not knowing what you are doing”, perfectly depicts the share market crash and behavior of the stock market. Stock market crashes have occurred over the years for various reasons, impacting millions of lives. However, the spirit of traders and investors has always fought against adversity.
To understand better, let us time travel to the past and learn more about stock market crashes over the years. Keep reading!
History of Stock Market Crashes in India
Table of Contents
May 1865
In 1865, the first-ever stock market crash happened in India. The stock market crash occurred before the Bombay Stock Exchange was founded at the intersection of Meadows Street and Rampart Row. The increased demand for cotton was due to the end of the American Civil War. Cotton, a vital export for Indian companies, contributed to the unrest. After the war, the demand for cotton decreased abruptly resulting in the sudden price drop. With this decline, the stock prices fell and investors in cotton-related companies lost their money. This led to establishing the interconnectedness of financial markets, highlighting the significant impact of global events impacting India’s economy. India began its financial journey, navigating both prosperous and challenging times, before establishing an organized stock exchange.
1982 - Friends of Reliance
In 1982, Reliance Industries faced a unique crisis when the value of the shares fell from ₹131 to ₹121. By engaging in a large short-selling operation of nearly 1.1 million shares, a bear cartel from Kolkata posed a serious threat to the market. Acting upon the situation, Dhirubhai Ambani addresses the situation by rallying the “Friends of Reliance.” During the settlement period, the group intentionally bought shares to counteract the cartel's impact. Ambani took action by stating that he wouldn’t allow the stock market to reopen until all outstanding deals were cleared. His unwavering determination led to an extraordinary three-day shutdown. This shutdown effectively protected small investors from possible losses, showcasing the power of influential figures in maintaining market stability. Ambani’s action in 1982 displayed his commitment to safeguarding the investors and the stock market.
April 1992 - Harshad Mehta Scam
Popularly known as the Big Bull of Indian stock markets, Harshad Mehta came to light with a ₹5000-crore scam leading to a market fall. This scam impacts millions of investors leading to losing faith in the Indian stock market. The market lost nearly 40% of its combined market value. Millions of people lost their life savings. Aftermath, to promote the interest of investors, the Indian government formed new laws and committees.
- On 29th April 1992, the Sensex fell by 570 points or 12.77%, and investors withdrew over ₹35 billion.
March 2008 - US Financial Crisis
The Indian Market experienced the biggest market crash ever. This market crash occurred due to the U.S. financial crisis which is considered the worst since the Great Depression. This financial crisis was a fallout of the housing bubble in the US. It caused all global markets to fall sharply even though it started in the US.
- The Sensex dropped by 950 points (6%), ending below 15,000.
- Between 2008 - 2009, the Indian market lost 50% of its value from the highs.
November 2016 - Demonetization and US Election Trends
The sudden announcement of demonetization by the Indian government on 9th November to stop the black money. The banning of 500 and 1000 rupee notes led to panic selling in the stock market. Moreover, the reports from the US indicated that Hillary Clinton was falling behind Donald Trump's demotivated investors as Hillary Clinton was popular with the investors.
- The demonetization announcement led to the Sensex falling 1,688 points or 6.12%, while NIFTY crashed by more than 540 points or 6.33%.
- The shares of conglomerates like Cipla, Adani Ports, HDFC Bank Ltd, ONGC, Hero MotoCorp, M&M, Bharti Airtel, Bajaj Auto, ICICI Bank, Sun Pharma, fell by over 5.50 points each.
- Most real estate majors like Godrej Properties, DLF, Unitech, Indiabulls Real Estate, Sobha Developers, and HDIL fell by 15%.
- Globally, crude oil prices fell below 45 levels, dropping by 2.65%.
June 2015 to June 2016 - Yuan Devaluation and Brexit
From June 2015 to June 2016 can be termed as one of the worst market crashes in India and the world.
- On 24th August 2015, Sensex fell 1624 points dropping 5.94% and wiping out nearly ₹7 lakh crore from the Indian market.
- Sensex had shed over 26% during April 2015 and February 2016.
The negative GDP news from China, the petroleum price fall, the devaluation of the Yuan, and the Greek debt default were major reasons for the year-long sell-off. The bond yield spiked amidst the Brexit issue.
March 2020 – COVID
The COVID-19 outbreak led to a pandemic and lockdowns all around the world leading to a huge market crash in India and the global market.
- The Sensex dropped from 42,273 to 28,288 in one week, from the day the World Health Organization (WHO) declared the virus as a pandemic.
- Investors became poorer by ₹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.
- The VIX or volatility index rose to 71.56, a jump of 6.64%.
- The 2,401 stocks regularly traded on the BSE, 2,036 stocks declined, and 233 advanced due to negative market sentiments.
- Since the day the Indian government declared a nationwide lockdown almost all major large-cap stocks dropped over 15%.
Stock Market Crash Predictions in 2025
With current global uncertainties such as rising interest rates, geopolitical challenges, and economic slowdowns in major markets, there is increase speculation about a potential stock market correction in 2025. However, it isimpossible to predict the exact timing or scale of a downturn, financial experts advise caution as some asset classes appear overvalued. Investors are encouraged to remain informed, avoid emotional decision-making, and maintain a well-diversified portfolio to help manage potential risks during periods of market volatility.
Conclusion
From the above mentioned history of stock market crashes, you can easily figure out why stock market is down today. The stock market can be impacted by various reasons such as government policy decisions, political instability, banking crises, health concerns, broker cartels, and wars. While these crashes are inherent to stock markets, recoveries have also been consistent. It is important to be vigilant about these events and have a brief understanding. This can help you plan a long-term stock investment strategy.
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FAQs on Stock market crash
What is the biggest stock market crash in history?
The year 1987 witnessed the biggest stock market crash in history, also known as Black Monday. It is known for being the biggest single-day percentage decline in U.S. stock market history.
How many times does the stock market crash?
There have been several stock market crashes over the years. Following is the list of Indian stock market crashes – the stock market crash of May 1865, the stock market crash of 1982, April 1992 - Harshad Mehta Scam, March 2008 - US Financial Crisis, November 2016 - Demonetization and US Election Trends, June 2015 to June 2016 - Yuan Devaluation and Brexit and March 2020 – COVID.
Do you lose all your money if the stock market crashes?
No, a stock market crash only shows a fall in stock prices where a majority of investors face losses but they don’t completely lose all their money.
What have been the major stock market crashes in India, and what caused them?
India has witnessed several significant stock market crashes, including those in 1992 (due to the Harshad Mehta scam), 2000 (the bursting of the dot-com bubble), 2008 (global financial meltdown), and 2020 (COVID-19 outbreak). These downturns were fueled by various triggers such as financial misconduct, overhyped tech stocks, international financial instability, and large-scale economic shutdowns.
How did the Harshad Mehta scam in 1992 lead to a stock market crash?
Harshad Mehta manipulated the stock market using counterfeit bank receipts to drive up share prices. When the scam was exposed, investor trust took a massive hit, leading to a steep market drop of over 40% and prompting tighter oversight of financial operations.
What was the effect of the 2008 global financial crisis on India's stock market?
During the 2008 crisis, India’s benchmark index, the Sensex, fell by nearly 60% from its peak. This was mainly due to global investors withdrawing funds, a freeze in international credit markets, and fears of a slowing economy affecting investor sentiment.
How did the COVID-19 pandemic trigger a stock market crash in 2020?
The onset of the pandemic sparked a rapid market sell-off in March 2020, wiping out more than 30% of market value within a short span. Lockdowns and halted economic activity severely impacted investor confidence and business operations across multiple sectors.
Which sectors suffered the most during India’s major stock market crashes?
Industries like banking, real estate, aviation, travel, hospitality, and automobiles faced significant setbacks during major crashes. These sectors are particularly vulnerable to economic stress due to their reliance on consumer spending and credit availability.
How has investor behavior in India evolved after previous market crashes?
Following past crashes, Indian investors have shown greater interest in long-term investing and financial planning. The adoption of SIPs, increased use of digital trading platforms, and a stronger focus on diversification reflect a more informed and cautious approach to investing.