Let's go back in past - Biggest Sensex crashes in a single day!

Most of us would recollect the first time we saw Nifty and the Sensex hitting lower circuits on May 17, 2004 when the NDA government was voted out and the Congress formed the government with the support of Left parties.

Jul 10, 2019 10:07 IST India Infoline News Service

Stock Market Down, Sensex Down
How exactly do you define a market crash? The globally accepted definition is a 10% fall in the indices in a single day. Most of us would recollect the first time we saw Nifty and the Sensex hitting lower circuits on May 17, 2004 when the NDA government was voted out and the Congress formed the government with the support of Left parties. The first statement by the Left Front was that they would stall disinvestments and economic reforms, leading to a sharp crash in the Sensex. Since then there have been many occasions when the Sensex has fallen sharply in a single day.
 
The 10 biggest falls in the Sensex

Adopting the absolute fall approach is biased towards elevated Sensex levels, but that still gives a fair picture. Check the table below.
 
No. Date Sensex Closing Sensex Fall (pts) Reason
1 24th Aug 2015 25,742 -1625 Yuan devaluation
2 21st Jan 2008 17,605 -1408 Sub-Prime crisis
3 24th Oct 2008 8,701 -1071 Post Lehman inaction
4 17th Mar 2008 14,809 -951 Crash of Bear Sterns
5 03rd Mar 2008 16,678 -901 Farm Loan Waiver
6 22nd Jan 2008 16,730 -876 Sub-prime crisis
7 06th Jul 2009 14,043 -870 Pranab Budget
8 06th Jan 2015 26,987 -855 BJP loses Delhi
9 02nd Feb 2018 35,067 -840 Tax on Equity LTCG
10 11th Feb 2008 16,631 -834 Sub-Prime spreads
Data Source: Moneycontrol
 
Sensex crashed by 792 points on July 08, 2019 due to the higher tax surcharge on FPIs. It is time to look back at the major absolute crashes in Sensex history.
  1. China spooked the world on August 24, 2015 with an unannounced devaluation of the Yuan. This was the first hint of a slowdown in Chinese growth bringing global growth assumptions into question. The Yuan devaluation weakened the rupee and that had its immediate impact on the Sensex.
  2. In a way, January 21, 2008 marked the beginning of the sub-prime impact in India. Large global banks started taking billion dollar write-offs on their sub-prime exposure and market cracked on fears of pronounced selling in India.
  3. The big Sensex reaction on October 24, 2008 came more than a month after Lehman folded up. RBI governor, Subba Rao, was unwilling to cut repo rates with the same aggression as the rest of the world. The liquidity crunch spooked markets.
  4. The crash on March 17, 2008 marked the end of Bear Sterns. In her famous book, Street Fighters, Kate Kelly described Bear Sterns as the toughest firm on Wall Street. By mid March 2008 Bear Sterns was aggressively offloading derivative positions across global markets including India.
  5. In a first of its kind, FM Chidambaram announced a Rs60,000cr farm loan write-off in the 2008 budget. The markets were unimpressed and cracked sharply. Of course, this announcement facilitated the return of the UPA in 2009.
  6. The crash on January 22, 2008 was a sort of continuation of the crash on the previous day. These 2 days (21st and 22nd Jan 2008) actually marked the end of the 5 year bull market that India had enjoyed since 2003.
  7. The crash on July 06, 2009 was surprising as it came 2 months after the upper circuit on the Nifty when the UPA returned to power. But Pranab Mukherjee had spooked the markets with generous welfare doles and a hint at taxing FIIs retrospectively.
  8. Less than a year after Modi romped to power in May 2014, the NDA government faced its first stern test in January 2015 in Delhi. Opinion polls suggested a BJP loss and markets were unimpressed.
  9. The crash of February 02, 2018 is a lot fresher as markets gave a thumbs-down to the budget decision to tax equity LTCG at a flat rate of 10%. It is a different issue that subsequently markets recovered the losses and more.
  10. The crash of February 11, 2008 marked the first signs of sub-prime spreading as questions were raised about the solvency of titans like Bear Sterns, Fannie Mae and Freddie Mac. Of course, Bear Sterns folded up in exactly one month.
Since crashes are in absolute terms, they are slightly biased towards higher Sensex levels. But, on all these occasions, the markets have virtually made up lost ground and more. That is the good news!

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