Harshad Mehta, 2008 Crash, COVID-19 and More

Mumbai: The stock market experienced a significant downturn on Monday, marking one of its steepest single-day declines since June 2024. The benchmark Sensex lost nearly 4,000 points, while the Nifty 50 index dropped below the 21,750 level, shaking investor sentiment across the board. Such dramatic declines, though not frequent, are not new to Indian markets. Several previous instances of major crashes have left a lasting imprint on the financial landscape.

In April 1992, the stock market was jolted by the exposure of the Harshad Mehta securities scam. Mehta had manipulated the system to artificially inflate stock prices using funds diverted from banks. Following the revelation, the Sensex crashed by 570 points, or 12.7 per cent, on April 28, marking what was then the largest single-day drop. This incident led to significant regulatory changes, including expanded oversight powers for SEBI.

Nearly a decade later, the Ketan Parekh scandal emerged in March 2001. Accused of driving up prices of specific stocks, Parekh’s actions caused widespread panic when uncovered. On March 2, 2001, the Sensex fell 176 points, or 4.13 per cent, as the market reacted to the scandal, compounded by weak global trends and domestic challenges such as the Gujarat earthquake.

Political uncertainty also triggered market turmoil in 2004. The unexpected defeat of the incumbent NDA government in the general elections rattled investors. On May 17, the Sensex tumbled by 11.1 per cent, prompting trading halts amid intense selling. Stability returned only after policy continuity was assured by the incoming UPA administration.

The global financial crisis in 2008, which followed the collapse of Lehman Brothers, led to another massive selloff. On January 21, the Sensex plunged 1,408 points, or 7.4 per cent, as foreign investors began withdrawing funds. The market entered a prolonged bearish phase, eventually losing nearly 60 per cent of its value.

In March 2020, the onset of the COVID-19 pandemic and the announcement of a nationwide lockdown resulted in a steep fall of 3,935 points, or 13.2 per cent, on March 23. Swift intervention by the government and central bank later helped markets rebound.

Monday’s slide adds to a list of volatile trading days that continue to shape investor confidence and regulatory frameworks.