History of Stock Market Crashes In India – Known And Unknown
The stock market is a volatile place, with instances of rapid double-digit falls in indices causing significant losses to investors. While markets have always rebounded, the impact of crashes has sometimes persisted for years.
Today, let's delve into the historical records to explore various known and lesser-known stock market crashes in India.
**1865**
India witnessed its inaugural market crash well before the incorporation of the Bombay Stock Exchange. In 1865, Gujarati and Parsi traders engaged in stock trading at the intersection of Meadows Street and Rampart Row.
The conclusion of the American Civil War in 1865 resulted in a decline in demand for cotton, a major export commodity for Indian companies. The sudden drop in cotton prices led to a stock market crash as individuals who had profited from cotton sales reinvested their earnings in stocks.
In 1874, stockbrokers migrated to Dalal Street, leading to the establishment of the Bombay Stock Exchange in 1875, the first in Asia.
**1982**
Although not a conventional stock market crash, the events of 1982 involving Dhirubhai Ambani are noteworthy. Facing a potential bear cartel takeover, Ambani strategically intervened.
During this period, Reliance Industries' shares plummeted from Rs.131 to Rs.121. Exploiting the 14-day settlement period, bear cartels short-sold around 11 lakh shares. Ambani, concerned about small investors and the company's reputation, mobilized brokers to buy Reliance shares, triggering intense trading. Ambani insisted on settling trades before reopening the stock markets, resulting in a three-day closure.
**1992**
The Harshad Mehta scam in 1992 precipitated a stock market crash, with the Sensex plummeting over 50% in a year. Mehta, dubbed the Big Bull, manipulated stock prices and siphoned off significant funds from banks, causing a market collapse and a two-year bear market.
**2008**
The global financial crisis in 2008 had profound repercussions on Indian stock markets. On January 21, 2008, Black Monday saw the Sensex plummet by 1408 points due to factors such as global investor confidence, recession fears in the USA, interest rate drops, commodity market volatility, and institutional selling.
By the end of 2008, the Sensex had dropped from 20,465 points to 9716 points, recovering only in September 2010.
**2015**
Despite recovering from the 2008 downturn, the Sensex fell 1624 points on August 24, 2015, primarily due to concerns about a slowdown in the Chinese economy. This was exacerbated by a poor monsoon in India and disappointing fiscal quarter earnings.
**2016**
The period of 2015-16 witnessed continued challenges for global stock markets. In India, the Sensex dropped around 26% by February 2016, attributed to high NPAs in Indian banks and global economic weaknesses. Frantic selling ensued in November 2016 after the Demonetization drive, causing a 6% fall in the Sensex.
**2020**
The COVID-19 pandemic in 2020 triggered a massive global and Indian market crash. Following the WHO's pandemic declaration, the Sensex plummeted from 42,273 points to 28,288 points within a week, coinciding with the Yes Bank crisis.
**Summing Up**
Stock markets, influenced by wars, cartels, political instability, banking crises, government policies, and health concerns, have weathered frequent crashes. Vigilance and a long-term investment strategy are crucial to navigating such turbulent periods, as historical patterns have shown consistent recoveries.