Stock market crash
Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Class 7, Ch 8 "Banks and the Magic of Finance"
Meaning
A stock market crash is a sudden, steep fall in the share prices of many companies at the same time. It is usually driven by panic selling: frightened investors rush to sell, and that pushes prices down further. Crashes can be set off by economic shocks such as wars, pandemics, disasters or sudden policy changes. To slow a panic, Indian exchanges have circuit breakers, which halt trading when the Sensex or Nifty moves 10%, 15% or 20%.
Example
In March 2020, fear about COVID-19 led to heavy selling in Indian markets. Prices fell so fast that the market-wide circuit breakers were triggered and trading was halted.
Don't confuse with
- Bear market: a long decline, commonly 20% or more from a peak, that can last months. A crash is a sudden fall over days or even hours.
Related concepts
- Secondary market
- Depository
- Demat account
- Clearing corporation
- T+1 settlement
- Algorithmic trading
- Circuit breaker
- Sensex
- Nifty 50
- Market capitalisation