History of Stock Market Crashes: 2008 vs 2024 Market Crash

There is a history of stock market crashes in India that have occurred owing to numerous economic, political, and international events and led to the loss of faith by investors. Not only India but other Countries have also experienced a similar decline making the weak market globally.

In this blog, we will see the reasons behind the stock market decline, and big market crashes in history, compare the 2008 vs 2024 market crash in detail, and as an investor what you should do during falling markets. Keep reading to explore.

 

Why do Stock Markets Crash? 

Stock markets depend on various internal and external factors. This market goes up when there is some favorable event that takes place domestically or globally. Similarly, in the opposite case, the market shows the opposite side i.e. it starts falling or goes for correction. Below are some common factors for the market fall. 

Key Reasons Behind Stock Market Crash

1. Panic Selling

• This is where things begin to collapse -  from profit and sell strategies to bulk selling as a result of fear.

• When this happens the downward spiral continues as the herd mentality takes over leading to crashing prices.

 

2. Black Swan Events

Any rare unpredicted occurrences like terrorist attacks, financial and economic frauds, as well as natural disasters could cause extreme stress and a complete market fall.

3. Crisis on Global and Geo-Political Levels

• Wars, global pandemics like COVID-19, or political unrest always down the confidence of investors.

• Markets respond adversely to uncertain business conditions in international trade and economies.

4. Recession & Economic Downturn

• A pause or slowdown in economic activities as indicated by slow GDP growth, increasing unemployment levels, or falling corporate profits causes declining investors’ confidence.

• A prolonged market downturn is often a result of a recession.

5. Overvaluation in Market Bubbles

• Stock market bubbles and bursts are relative phenomena and when stock prices rise excessively out of the core fundamentals like the dotcom bubble, astronomical correction is unavoidable.

• The collapse of investment bubbles has a harmful impact with severe losses due to liquidations of holdings.

6. Shifts in Regulatory Framework & Policy

Like other events and phenomena within a market, government policies such as regulations, sudden tax increases, or prohibitive measures tend to impact markets.

e.g. Demonetization in India in 2016 certainly had effects on multiple sectors.

 

Big Market Crashes in History

There have been major market falls in the past. Below are some such biggest market crashes mentioned-

 

 

1. 2024 Market Fall 

The year 2024 saw considerable activity in the world stock markets after suffering significantly from turmoil. For starters, due to unanticipated circumstances from India's 2024 Lok Sabha elections, investor confidence took a hit which brought about a downturn of the stock market by more than 4,000 points and the Sensex fell by 4,000 points within one single day.

In Oct-Nov 2024 the Nifty 50 fell almost 11% a sharp decline from 25232 to 23261.45 which has been shown in the image below. 

 

(Source: TradingView)

2. COVID-19 Market Crash (2020)

Bear markets are widespread declines in stock prices, and this was the fastest in history due to global lockdowns. There was so much uncertainty in the global market that the S&P 500 lost more than 30% in just a matter of weeks. Simultaneously, central banks started issuing gigantic stimulus packages. 

The Sensex index dropped to 25,981 from its peak of 42,000, while the Nifty 50 Index fell to 7,610 from an amazing 12,000 in January.  

 

3. Global Financial Crisis (2008)

This was caused by the United States Housing market crash laced with excessive risk-taking by banks, which led to Lehman Brothers closing their doors. This single event triggered a global recession and the S&P index plummeted down by 50% from its peak value. 

The Nifty share index dropped down to 2,524 by the latter part of October from 6,287 at the beginning. The Sensex index also did not fare much better as it took a significant blow as well, dropping down to 8,160 from 20,300.

4. Yuan Devaluation And Brexit (2015)

The devaluation of China’s yuan and Britain's leaving the European Union is what caused the Sensex index to fall at an alarming rate of 6% on 24th August 2015 which wiped away INR 7 crore in market capitalisation.

The Nifty 50 and Sensex experienced deep falls during this period. One of the largest declines was made on 24 August 2015, (Black Monday) when the Sensex recorded a fall of over 1,600 points (almost 6%) and the  Nifty crashed 490 points (close to 5.9%). 

5. Harshad Mehta Scam (1992)

This particular revelation of the scam culminated in a dire consequence, dropping the Sensex to plunge by 570 points in a single day. From Rs.4,000 crores in 1992, the expose brought down the market cap of its investors by a whopping amount of Rs.4,000 crores. This resulted in panic selling and within a year the Sensex fell by beyond 50%.

 

2008 vs 2024 Market Crash: Detailed Comparison

A comparison of the recessions for 2008 and 2024 is crucial because both featured noteworthy declines in the performance of India’s stock market indices, the Nifty 50 as well as the BSE Sensex. Detailed comparison of the magnitude of falls in these two time periods is presented below:

 

Important Notes:

• Market movements in 2024 were severe and negative, though not as bad as the 2008 fall where both indices lost more than fifty %. In 2024, the losses were around twelve %, while in 2028, the losses were much greater.

• The 2024 decline also took less time to correct, standing at four months. The 2008 correction took much longer at a duration of 10 months.

• Market sentiments during the 2008 downturn were more pessimistic due to the global financial crisis that was prevailing and hence corrective measures taken by the market were a lot more aggressive. In contrast, the severity of the 2024 downturn was much higher, but it was lesser than the rest of the years, and as such analysts expect a slow recovery.

 

What Should Investors Do During Market Crash?

1. Diversification: Spreading one’s investments among various industries, asset categories, and geographies to manage losses in one class with gains from other classes.

2. Explore Non-Market Linked Investment Options: Invest in non-marketable options like corporate bonds, securitized debt instruments (SDIs), and fractional commercial real estate (CRE) that provide predictable returns regardless of changing market conditions.

3. Regular Monitoring And Rebalancing: Adjust your portfolio structure periodically according to your long-term goals and ever-changing economic conditions. 

4. Take Advantage of Cost Averaging: Allocate a specific amount of funds to be invested at different time intervals to counterbalance the effects of volatility in the market. Usually done through SIP investments.

 

 

 

Conclusion

There are many reasons why stock market crashes happen. Panic selling, global instances, economic downturns, or policy changes may instigate such crashes. The crashes of 2008 proved to be a long and severe one, while the declines of 2024 were aggrieved and fast. 

Accepting history, it will be evident that markets always rally back, and those investors who have maintained their patience and sober intelligence have always emerged winners. Some alternative methods diversification, guarded monitoring, and cost averaging, to mitigate risks during these times. Investors should not be responding to their fear but rather trying to think of long-term strategies. Knowledgeable and wise investment choices can lead to financial security.

 

Disclaimer: No buy or sell recommendation. No investment advice it is. This blog is purely for information purposes. Investors should research well and discuss with an eligible financial advisor before investing.