India's 5 biggest single-day stock market crashes: From Harshad Mehta scam to COVID-19 pandemic

Indian stock markets witnessed a bloodbath on Monday as benchmark indices Sensex and Nifty 50 crashed sharply, mirroring a global sell-off triggered by fears of a looming recession in the United States amid escalating global trade tensions. The sharp plunge wiped off investor wealth worth nearly ₹16 lakh crore within minutes of the opening bell.

The BSE Sensex nosedived 3,914.75 points, or 5.19%, to open at 71,449.94, while the NSE Nifty 50 dropped 1,146.05 points, or 5.00%, to 21,758.40 in early deals — heading towards a one-year low. The broader market bore the brunt as well, with Midcap and Smallcap indices tanking up to 10%, signalling widespread panic.

The sudden crash was largely in response to fears of a recession in the US following retaliatory tariff measures announced by President Donald Trump, sparking concerns over a full-fledged global trade war. The India VIX — a measure of market volatility — spiked 56.50% to 21.53, reflecting heightened investor anxiety.

The massive sell-off led to a drastic fall in the market capitalisation of BSE-listed companies, which tumbled from over ₹403 lakh crore in the previous session to ₹387 lakh crore — a wipeout of nearly ₹16 lakh crore in investor wealth.

Market watchers noted that the scale and swiftness of Monday’s fall bear an eerie resemblance to some of the darkest days in Indian stock market history, including the infamous ‘Black Monday’ crash of October 19, 1987.

Here's a look at India's 5 biggest single-day stock market crashes:

On April 28, 1992, the Sensex crashed 570 points, or 12.7%, after the ₹4,000 crore scam involving stockbroker Harshad Mehta came to light. The episode shook investor confidence and prompted sweeping reforms in market regulation.

Following the exposure of another stock manipulation scandal in March 2001, involving broker Ketan Parekh, the Sensex dropped 176 points, or 4.13%. A series of negative events, including the dot-com bust and Gujarat earthquake, intensified the downturn.

On May 17, 2004, in the wake of the unexpected General Election results, the Sensex fell 11.1% amid concerns over the UPA government’s commitment to economic reforms. The panic led to a trading halt, before clarity and reassurances helped markets stabilise.

Amid the worldwide financial crisis, the Sensex plunged 1,408 points, or 7.4%, on January 21, 2008. The meltdown was triggered by the collapse of US investment bank Lehman Brothers, causing massive FII outflows and a prolonged bear phase.

On March 23, 2020, the Sensex recorded its worst-ever single-day fall, crashing 3,935 points, or 13.2%, after India announced a nationwide lockdown. The global health crisis sparked fears of a severe recession before recovery measures spurred a rebound.

Analysts believe that global cues will continue to dictate market sentiment in the near term. “This correction is a reaction to global uncertainties, particularly the fear of recession in the US. Investors should brace for high volatility,” said a senior market analyst.

With geopolitical and economic tensions rising, and volatility surging, market participants are advised to exercise caution and focus on long-term fundamentals rather than short-term panic.