From Bull To Bear – A Detailed Timeline Of Major Indian Stock Market Crashes

The stock market is inherently volatile, capable of delivering substantial gains or significant losses within a short span. As the Indian market faces a downturn, with the Sensex plummeting over 1,400 points to 73,198 and the Nifty dropping 420 points to 22,124 last Friday, market experts are increasingly concerned about the road ahead.
However, this isn't the first time Dalal Street has witnessed such turbulence. Throughout history, the Indian stock market has faced several major crashes, each triggered by unique economic and financial events. Here's a timeline of the most significant stock market crashes in India and the reasons behind them.

1865 - The Cotton Boom And Bust

Long before the Bombay Stock Exchange (BSE) was established, Gujarati and Parsi traders informally traded stocks at Meadows Street and Rampart Row. The American Civil War created a surge in demand for cotton, leading to skyrocketing prices and a stock market boom in India. Many traders reinvested their cotton profits into stocks, further inflating prices. However, when the war ended in 1865 and demand collapsed, the market crashed, causing severe financial losses.

1992 - The Harshad Mehta Scam

Harshad Mehta, known as the 'Big Bull' of the Indian stock market, manipulated stock prices by artificially inflating demand and siphoning over Rs 1,000 crore from banks. When the scam was exposed, the Sensex plunged by nearly 2,000 points to around 2,500, marking one of the most significant crashes in Indian history. This also led to a prolonged bear market that lasted nearly two years.

1997 - The Asian Financial Crisis

The Asian Financial Crisis began in Thailand in July 1997 when the Thai baht was devalued by nearly 30 per cent after the country's foreign reserves were depleted. This triggered economic turmoil across Asia, causing the BSE Sensex to drop by over 28 per cent, from its peak to 3,300 by December 1997. The Indian stock market took nearly a year to recover.

2000 - The Dot-Com Bubble Burst

Fueled by excessive speculation in internet-based companies, the Dot-Com Bubble saw investors pouring money into technology startups, driving stock prices to unsustainable levels. However, many of these companies lacked profitability, and when investor confidence collapsed, the bubble burst. In India, the BSE Sensex tumbled by 43 per cent, falling from 5,937 in February 2000 to 3,404 in October 2001. The tech-heavy indices bore the brunt of the downturn.

2004 - UPA Coalition Shock

On May 17, 2004, following the unexpected defeat of the National Democratic Alliance (NDA) and the rise of the United Progressive Alliance (UPA), the Sensex crashed by 15 per cent in a single trading session. Investors panicked due to uncertainties surrounding economic policies and governance, leading to a market meltdown.

2008 - The Global Financial Crisis

On January 21, 2008, also termed as Black Monday, the Sensex crashed by 1,408 points, wiping out investor wealth. The crisis was triggered by multiple global factors, including

• A decline in U.S. interest rates
• Volatility in commodity markets
• Growing fears of a U.S. recession

The Indian markets suffered heavy losses, mirroring the broader global financial crisis.

2015 - The Global Slowdown And China's Market Crash

A slowdown in China's economy and a significant crash in its stock market had a ripple effect on global markets, including India. The BSE Sensex plummeted by 24 per cent, dropping from 30,000 in January 2015 to 22,951 in February 2016. In India, this was further worsened by a poor monsoon season and weak corporate earnings in the first quarter of the fiscal year. The market took nearly a year to recover.

2020 - The COVID-19 Crash

The COVID-19 pandemic led to one of the worst global economic crises in the modern history. When the World Health Organization (WHO) declared COVID-19 a pandemic in March 2020, the Sensex nosedived from 42,273 points to 28,288 within a week. In India, the crisis was further exacerbated by the Yes Bank crisis, which caused a steep decline in the BFSI sector.