In what is being referred to as a “Black Monday” for the Indian Stock Market, investors saw one of the sharpest one-day crashes in years, erasing a whopping Rs 19 lakh crore from the market. The meltdown was triggered by the announcement of broad import tariffs by former US President Donald Trump on more than 180 nations, setting global financial markets in a tizzy.
The BSE Sensex nose-dived by 3,914.75 points or 5.19%, beginning the day at 71,449.94, while Nifty 50 fell 1,146.05 points or 5%, beginning the day at 21,758.40. Every sector ended in the red deep, with IT, pharma, metal, and auto stocks bearing the worst brunt.
Market Cap Erosion and Sectoral Bloodbath
The market capitalization of BSE-listed firms collectively fell from Rs 403.34 lakh crore to Rs 383.81 lakh crore, a loss of almost Rs 19 lakh crore in hours. Mid-cap and small-cap indices fell even more precipitously, further heightening investor misery across the board.
Asian markets such as Japan and Hong Kong and Wall Street also saw sharp falls, contributing to the selling pressure in Indian stock market. Foreign institutional investors (FIIs) dominated the selling, offloading huge volumes of stock.
Tariff Mayhem and International Apprehension
Trump’s threat of new import tariffs has revived apprehensions over a worldwide trade war. Experts feel that this can severely jolt international trade flows and company profits, causing extended market volatility.
“The market has responded sharply to the threat of renewed trade war, which has the potential to slow economic growth and put earnings under heavy pressure,” said a senior brokerage analyst.
What’s Next for Indian Stock Market?
Market analysts caution that if fears of a trade war increase further, Indian markets can expect further drops in the near term. Any fiscal or monetary support from the Reserve Bank of India or the government could, however, help stabilize the trend.
Long-term investors might take this drop as an opportunity to buy, but short-term traders can expect volatility to continue.
Not the First Time: Biggest Crash in Indian Stock Market
This is not the first time that the Indian stock market have experienced a spectacular crash. These are five of the largest single-day market crashes in Indian history:
1. Harshad Mehta Scam Crash (1992)
The Indian economy received its initial major shake-up in 1992 when the Harshad Mehta scam. The Sensex lost 570 points or 12.7% on 28th April, 1992. This led to major reforms in India’s financial sector, such as increased powers for SEBI as a regulator.
2. Ketan Parekh Scam Crash (2001)
The market was shaken once again in 2001 by another broker, Ketan Parekh’s manipulation scandal. The SENSEX went down by 176 points or 4.13% on March 2, 2001. It coincided with poor global leads and the Gujarat earthquake aftermath.
3. Election Shock Crash (2004)
On May 17, 2004, the Sensex plummeted by 11.1% on the shock defeat of the NDA by the UPA in the general elections. Panic selling compelled the exchange to suspend trade twice during one day. Only after the UPA asserted that it would stay committed to economic reforms did the market regain its confidence.
4. Global Financial Crisis Crash (2008)
Lehman Brothers’ collapse set off a meltdown all over the world, with Sensex plunging 1,408 points or 7.4% on January 21, 2008. In the next few months, the index declined almost 60% from its height, which is one of the worst bear periods in the history of Indian markets.
5. COVID-19 Pandemic Crash (2020)
On March 23, 2020, panic over the COVID-19 nationwide lockdown led to the Sensex falling 3,935 points or 13.2%, the largest single-day fall in Indian stock market history.
Conclusion
As markets absorb the ripple impact of Trump’s tariff announcement, investors are on tenterhooks. With global uncertainty and volatility increasing, Indian markets may continue to be under pressure in the days ahead. Stakeholders now turn to policy actions by central banks and governments to soothe the storm.
For long-term investors, history has proved that market crashes, though painful, tend to create opportunities. But caution is the need of the hour.