Famous Stock Market Crashes: Lessons Learned from History
Introduction
Stock market crashes have had a profound impact on the global economy
Let us explore some of the most famous crashes and the valuable lessons they teach us
Harshad Mehta Scam (1992)
Harshad Mehta manipulated stock prices, leading to a market crash.
Importance of regulatory oversight, transparency, and the need for robust risk management systems.
Lessons:
Ketan Parekh Scam (2001)
Ketan Parekh engaged in fraudulent trading practices, causing market instability
The risks of market manipulation, the role of auditors, and the need for strict enforcement of securities regulations
Lessons:
Global Financial Crisis (2008)
The global crisis had a significant impact on Indian stock markets
Importance of risk diversification, understanding global interconnections, and the need for effective crisis management
Lessons:
Flash Crash (2014)
A sudden and rapid decline in Nifty 50 index occurred due to erroneous trades
The importance of circuit breakers, market surveillance, and robust risk management systems
Lessons:
Demonetization (2016)
The Indian government's decision to demonetize high-value currency notes caused market volatility
The impact of government policies on markets, the need for adaptive investment strategies, and managing short-term market disruptions
Lessons:
IL&FS Crisis (2018)
Infrastructure Leasing & Financial Services faced a severe liquidity crisis
The significance of credit risk assessment, due diligence, and the role of credit rating agencies
Lessons:
COVID-19 Pandemic (2020)
The pandemic-induced market crash resulted in extreme volatility and economic uncertainty
The importance of risk management, resilient investment strategies, and the value of long-term investing
Lessons:
NSE Technical Glitch (2021)
Technical issues at the National Stock Exchange disrupted trading
The significance of robust market infrastructure, contingency planning, and effective communication during disruptions
Lessons:
Conclusion
Famous stock market crashes in India provide important lessons for investors and regulators
Learning from history can help navigate volatile markets, strengthen regulations, and build resilient investment portfolios