The Indian stock market has seen ups and downs in its graphs, some of which have turned into major market crashes in history.
Whether you take an example of the Great Depression in 1929 or the recent clashes between the Adani Group and the Hindenburg Report, there is a lesson in each stock market crash that every Indian investor must learn from. In this article, you will get to know about 8 crashes that have impacted the stock market and how you can use this information for your long-term investing plan.
The Top 8 Stock Market Crash In India History
1. The Great Depression: 1929
The Great Depression was a prolonged economic recession in the global market due to the crash of the US stock market in 1929. It lasted till 1941, when it entered World War II, where people faced several economic contractions, including banking panics in 1930 and 1931.
The Impact of the 1929 Market Crash
- The US stock market fell by nearly 50%, and corporate profits declined by over 90%, which is known as the 1929 black tuesday.
- The Dow Jones Industrial Average (DJIA) had increased 500% in just five years, and the NYSE bubble burst violently on October 24, 1992.
- The brief rally occurred on Friday, the 25th, against the downfall of the market and lasted for the next whole week.
- Experience loss of money supply and unprecedented increases in asset prices in real estate and the New York Stock Exchange (NYSE).
- The imposition of a multi-industry tariff on more than 880 foreign products.
2. Introduction Of Computerized Trading: 1987
The next stock market crash in the United States was the “Introduction of Computerized Trading” in 1987. It caused the massive decline of US stock prices in just a few days in October of that year and is named 1987 Black Monday.
The Impact of the 1987 Black Monday Crash
- The Plaza Accord, introduced in 1985 to automate trading, was unable to process a large trading volume and a steep price decline.
- The federal government disclosed a larger-than-expected trade deficit and the dollar’s fall in value.
- In October, companies were facing large daily losses.
- The DJIA has lost almost 4.6% of its shares by October 16.
- The imbalance was so large that 95 stocks on the S&P 500 Index were opened larger than expected late.
- The spreading collapse of securities firms extended the liquidity crisis.
3. The Harshad Mehta Scam: 1992
1992 was the infamous stock market crash in the financial history of India due to the manipulation of stock prices by Harshad Mehta. He siphoned money from the banks and was unable to repay, which resulted in the rapid downfall of the stock market.
The Consequences of the 1992 Stock Crash
- The Sensex reached greater heights of 4,500 points and came crashing down.
- Thousands of investors died due to the loss of their lifetime savings in the stock market.
The Government of India has established SEBI as an effective regulatory body to protect against such market crashes.
4. The Dot-Com Bubble: 1995-2000
The Internet was the next big thing in 1990, when new tech companies were born every day, and investors believed these companies would become the next big success. The Dot-Com bubble burst in the year 2000, when many stocks crashed.
The Outcomes of the Dot-Com Burst
- Stock prices soared, and many investors made quick money.
- Many investors have chased hype and neglected the risks that result in huge losses.
The stock market crashes in the year 2000, and millions of investors lost a large sum.
5. The Global Market Crisis: 2008
The world faced a banking and housing crisis in the year 2008, resulting in huge market crashes. Big banks failed, and the credit market froze, as the investors didn’t fully understand and failed.
The Impact of the Global Financial Crisis
- Investors started selling their investment in panic that resulted in a total stock crash.
- This fear of losing resulted in the bottom of the recovery in the years that followed.
- The Lehman Brothers in the US triggered the stock market crash, which impacted globally.
- The fear of recession in the US dropped the interest rate and lowered investor confidence.
6. The Demonetization Shock: 2016
The Government of India declared demonetization on November 8, 2016, and the stock market graph drastically changed due to a lack of policies and planning. The Reserve Bank of India was unaware of the decision that resulted in the market crashes with immediate negatives in the stock market.
The Consequences of Demonization
- The Sensex and Nifty experienced a steep fall due to a sudden squeeze of liquidity in the economy.
- The stock market crash has gravely impacted the real estate sector, banks, and small businesses.
- People stood in lines, and many people died just in the hope of managing their daily household finances.
- The Indian economy took months to adjust to the new currency regime.
7. The Covid-19 Market Crash: 2020
The whole world was under lockdown due to COVID-19 in the year 2020, which corresponded to an appealing economic uncertainty. The investors have gone through great losses due to global market crashes, resulting in the following consequences.
Consequences of Covid-19 Market Stock Crash
- The index went down from roughly 42,000 points to almost 25,000 points by March 2020.
- The market shows panicked withdrawals and a huge amount of volatility from investors.
- The market recovered to new highs by March 2021, which resulted in a great loss to the investors.
8. The Great Volatility of Adani Group Stocks: 2023
The year 2023 was not a good period for the Adani Group due to the Hindenburg Report. The organization claimed and even provided evidence of money laundering and share manipulation that resulted in the stock crash in the Indian market.
The Impact of Adani Group and Hindenburg Clashes
- The Adani Group stocks lost billions in market capitalization within a few days.
- The investors pulled their money from the market due to overall fluctuation.
- Regulatory scrutiny increased on corporate governance practices.
Top 5 Learning From Stock Market Crashes in History
When you observe the history of the biggest market crashes, you will find that the stock prices have gone down, but it won’t last for long. Indian investors miscalculated the risk and pulled all the investments out of fear of losing more money. As a result, they lost the long-term profits that they might have gained in a long investment period.
Therefore, it is essential to understand how the market works and choose a long-term investment plan. In this regard, we have provided 5 lessons that you must implement to secure your investments even when the stock market bubble bursts.
- Set long-term investment goals and stay stuck until you achieve them while focusing on the market swings.
- Consider SIPs (Systematic Investment Plans) by investing in long term investment stocks India if you have limited knowledge of the share market.
- Have patience during market crashes and hold your investment to gain sustainable growth in the market highs.
- Don’t pray to sell your investment in panic; in contrast, understand the difference between a notional loss and a realized loss to optimize your portfolio.
- Always invest in companies that have strong fundamentals and the ability to apply the right strategies to mitigate risks in disruptive market events.
Final Words
The history of market crashes shows that people often panic and are afraid of losing their investment, and take unwanted decisions that put them at a loss. If you are planning for long term investment stocks India then it is essential to be patient in the disruptive market situations and keep on investing until you achieve your goal. Contact a professional broker to get an effective investment plan for stable growth, consider SIP for a long-term investment, and diversify your portfolio to balance your growth in situations like a stock crash.
