In this era, the stock market is one of the major ways to make a million Rupees. But the stock market is a vast, complex network of trading. The stock market is the network where the shares of the companies are bought and sold, legally under the law protected by the government. 

Million people came into the business of trading but could not succeed due to personal fault or sometimes the crash of the market itself. Here in this blog, we are going to tell you Why stock market is falling today in India. We will also see major setback in the Indian stock market and steps to prevent these setbacks. 

Why Stock Market is Falling Today in India: 5 Main Causes

Since the start of the Indian stock market, it has gone through major 5 setbacks. Below are brief descriptions of them:-

1. 1992: Harshad Mehta Scam

In 1992, the Indian stock market experienced the biggest decline in its history. The main cause of this was the Harshad Mehta scam, which involved manipulating investments and the stock market.

2. 2004: Crash Foreign Institutional Investor 

In 2004, Another of the biggest stock market crashes happened in India. The analysis led experts to conclude that the crash was primarily caused by a foreign company selling large quantities of shares on behalf of unknown clients.

3. 2007: Financial Crisis

The year 2007 was one of the worst for the Indian stock market ever. The first downturn started in 2007 and continued until 2009, causing a string of significant drops that affected the Indian stock market.

4. 2008: Great Recession

This year is being referred to as the “Great Recession” globally.Although the global collapse did not affect India, it was enough to stop the Indian stock market’s upward trend.

5. 2015-2016: Black Monday

In 2015, a significant shock to the Indian economy led to a stock market breakdown. The crash occurred during a period of steady economic expansion, and the slowdown in Chinese markets was found to be the cause. Sales of stocks started to pick up speed in China and India.

Reason Behind Collapse of Indian Stock Market

The multiple reasons behind the stock market falling today in India. In this given below is the list of top reasons:-

1. Speculation

The reason behind a lot of market collapses is excessive speculation. The early 2000s tech stock market breakdown was caused by excessive investment in dot.com businesses. Furthermore, real estate speculation by investors (and banks that encouraged the practice) may have contributed to the 2008 financial crisis.

2. Excessive Leverage

Leverage commonly known as “borrowed money” may appear to be a helpful tool when things are going well.

However, when things are going against you, leverage can be very dangerous. When things go wrong, too much leverage can lead to inequities that spiral downward. When prices decline, companies and investors with large debt loads are forced to liquidate, which lowers prices even more.

3. Rates of Inflation

In terms of the economy, higher interest rates result in higher borrowing costs, which typically lower stock prices and decrease demand for goods and services. Therefore, a rise in the 30-year mortgage rate to, say, 6% could significantly slow down the housing market and lower the stock prices of homebuilders.

4. Political Environment

Markets prefer stability, but political risk and wars have the opposite impact. Investors are frightened about their next moves when there is uncertainty in the environment.

5. Tax Changes

The amount of nominal income related to inflation is subtracted from the tax base. This method lowers the real taxable income while maintaining the nominal taxable income. This means that it will make up for the effects of inflation.

Risk Management Strategies for Extreme Periods

If you’re an investor who is risk averse, you should use the following techniques when creating your budget:

• The stock market is typically very volatile right before and right after the budget. This is because there is a great deal of uncertainty at this time regarding the effects of a budget.
• You shouldn’t take on too much at this time to reduce the chance of such volatility. It means that two to three days before and two to three days after the budget, you should not buy or sell too much.
• If there is a lot of volatility on the budget day and you still want to trade, stop-loss orders can help you limit your losses.

FAQ’s

Disclaimer

All the data that has been given in this article are 100% verified. Thus the reader can truly rely on the blog. Also remember that we do not promote any kind of investment tipis to the reader. 

Also Read: CarDekho Success Story: Funding, Partnerships, and Industry Role