Significant stock market crashes in India's history.

The Indian stock market, primarily represented by the Bombay Stock Exchange (BSE) Sensex, has experienced several significant crashes throughout its history. These events have been triggered by a mix of domestic and global factors, ranging from financial scams to geopolitical tensions and economic downturns. Below is an overview of some of the most notable BSE stock market crashes in history, along with their reasons:

1. 1865 Crash - The First Recorded Crash

• Event: Before the formal establishment of the BSE in 1875, a speculative bubble in cotton stocks burst in 1865.

• Reasons: The American Civil War (1861–1865) increased demand for Indian cotton, driving prices and stock values skyward. When the war ended, demand collapsed, leading to a sharp decline in cotton prices and a subsequent crash in related stocks. This event highlighted the vulnerability of Indian markets to global commodity shifts.

2. 1992 Crash - Harshad Mehta Scam

• Event: The BSE Sensex surged to over 4,500 points before crashing by about 55% within months, dropping to around 2,000 points.

• Reasons: Stockbroker Harshad Mehta manipulated stock prices by siphoning off over ₹1,000 crore from banks through fraudulent means. He artificially inflated stock prices, particularly of companies like ACC Limited, before selling them off. When the scam was exposed in April 1992, panic selling ensued, crashing the market. This led to the creation of stricter regulations and the empowerment of the Securities and Exchange Board of India (SEBI).

3. 2001 Crash - Dot-Com Bubble and Ketan Parekh Scam

• Event: The Sensex fell from around 4,200 points in early 2000 to 2,594 by September 2001, a decline of over 38%.

• Reasons: The global dot-com bubble burst impacted Indian tech stocks, compounded by the actions of broker Ketan Parekh. Parekh manipulated prices of select "K-10" stocks using borrowed funds. When the bubble burst and his scheme unraveled, the market crashed, eroding investor confidence and exposing regulatory weaknesses.

4. 2008 Global Financial Crisis

• Event: The Sensex plummeted from a peak of over 20,000 in January 2008 to around 8,000 by March 2009, a drop of over 60%.

• Reasons: Triggered by the collapse of Lehman Brothers in the U.S., the crisis led to a global liquidity crunch. Foreign Institutional Investors (FIIs) withdrew massive funds from India, causing a sharp decline. Domestic factors like a slowdown in economic growth and a banking sector burdened by rising non-performing assets (NPAs) exacerbated the fall. Recovery took nearly two years, supported by global stimulus measures.

5. 2015-2016 Crash - China Slowdown and Domestic Woes

• Event: On August 24, 2015, the Sensex crashed by 1,624 points (5.94%), closing at 25,741. By February 2016, it had fallen 26% from its April 2015 peak.

• Reasons: A slowdown in China, marked by the devaluation of the Yuan and an 8.5% drop in the Shanghai Stock Exchange, triggered a global sell-off. In India, disappointing corporate earnings, a below-average monsoon, and rising NPAs in banks added pressure. The ripple effect from China highlighted India’s exposure to global economic shifts.

6. 2016 Demonetization Crash

• Event: On November 9, 2016, the Sensex dropped 1,689 points (6.12%) to 26,902 following the government’s demonetization announcement.

• Reasons: The sudden withdrawal of ₹500 and ₹1,000 notes aimed to curb black money but led to a cash crunch, sparking panic selling. Uncertainty over economic growth, a weakening rupee, and concurrent global factors like the U.S. presidential election further fueled the decline. Other Asian markets also saw sharp falls that day.

7. 2020 COVID-19 Crash

• Event: The Sensex fell from 41,000 in early March 2020 to 25,981 by March 23, a single-day drop of 3,935 points (13.15%), one of the worst in history.

• Reasons: The global spread of COVID-19 and ensuing lockdowns triggered widespread fear of an economic shutdown. Panic selling was intensified by the Yes Bank crisis in India, which shook the banking sector. The rapid decline erased over ₹13.88 trillion in market value within a week, though recovery began by late 2020 due to government stimulus and vaccine optimism.

8. 2024-2025 Crash (Ongoing as of Early 2025)

• Event: The Sensex dropped over 10,000 points (11.79%) from its September 2024 peak by March 2025, with a notable single-day fall of 2,227 points on April 6, 2025.

• Reasons: U.S. President Donald Trump’s aggressive tariff policies on over 60 countries sparked fears of a global trade war and recession. FIIs pulled out over ₹2.96 lakh crore from Indian equities in 2024, driven by a stronger U.S. dollar and higher U.S. treasury yields. Domestic factors included weak corporate earnings, a coalition government post-election, and slowing GDP growth (5.4% in Q2 2024), leading to a $1 trillion loss in market value.

Common Themes and Observations

• Global Linkages: Many crashes (2008, 2015, 2020, 2025) were tied to international events, showing India’s increasing integration with global markets.

• Domestic Triggers: Scams (1992, 2001), policy shocks (2016), and banking issues (2020) have been significant local catalysts.

• Recovery Patterns: While some crashes took years to recover (e.g., 2008), others, like 2020, saw quicker rebounds due to proactive interventions.

These events underscore the volatility inherent in stock markets and the interplay of economic, political, and psychological factors driving crashes. Despite these downturns, the Indian market has historically demonstrated resilience, often recovering to reach new highs over tim