Before you see the historical data for the Sensex falls, let’s first see what a stock market crash is.
What is a Stock market crash?
A stock market crash means a rapid double-digit fall in stock market indices. The fall figures are the closing level of the indices on that day. The volatility on such days is quite high, even it touches lower levels called intraday low. This may cause losses to you within no time.
Do you want to know the biggest Sensex falls?
What are the dos and don’ts during a Sensex fall?
This article will give you historical data on the biggest Sensex falls and will also tell you the dos and don’ts during Sensex falls. Remember at the market peak AND bottom –“This too shall pass”
Table of Contents
- Don’t Panic
- Be A Contrarian
- Invest In Fundamentally Strong Companies
- Stick To Your Investment Goal
- Remain Invested
- Do not Borrow and Invest
Now, let’s have a quick look at the biggest Sensex one-day falls (crashes) in the history of the Indian market.
20 Biggest Sensex One-Day Falls (Crashes) in terms of Percentages since the year 2000:
What do you see in the above table?
The least fall is 5.85% and the highest fall is 13.15%.
In the year 2000, there’s a fall in April followed by May and July. This is followed by a fall in 2001 March, followed by September. Then there is a fall in 2004 twice in May. Then in May 2006.
Then there is a fall in the year 2008 in Jan followed by March and thrice in October, followed by November. Then there is a fall in Jan 2009 followed by August 2015. Then thrice in March 2020 then once in May.
What do we infer from the above information?
The Sensex has fallen up to 13.15% in a single day. But this doesn’t mean it won’t fall further. It can even fall further and the fall is unpredictable.
Likewise, let’s check the frequency of falls.
In the years 2000 and 2001, there is a fall. Then there is no fall in 2002 & 2003. Then there is a fall in 2004 and no falls in 2005. A fall in 2006 and no falls in 2007 and again there is a fall in 2008 & 2009.
There is no fall from 2010 to 2014. Then there is a fall in 2015 and no falls from 2016 to 2019. Then there is a fall in 2020.
Hence the frequency of falls cannot be predicted.
Thus the decisions taken based on these can go wrong. Therefore to make the right
decision, we are giving you the dos and don’ts during a Sensex fall.
Now here is a list of things to be kept in mind during a Sensex fall.
What are the Dos and Don’ts during a Sensex fall?
- Don’t Panic
The value of a business does not change overnight but its stock price often does.
During the Sensex falls, the stock price falls thereby leaving the investor with a notional loss. But you shouldn’t fall prey to market noise as Panic makes you press the sell button. This is what most investors do but it’s better you stay away from this herd behavior.
“Hard pill to swallow for Investors:
If your stock price hike gives you joy,
And a drop gives you anxiety,
With no change in the company’s fundamentals,
There’s nothing wrong with the stock,
But everything with your investment attitude.”
Be A Contrarian
“Be fearful when others are greedy, and greedy when others are fearful” – Warren Buffett.
The contrarian sees buying opportunities in stocks that are currently selling below their intrinsic value. This strategy involves a long waiting period to reap the reward.
Invest In Fundamentally Strong Companies
A fundamentally strong company is one that can run its operations from its “share capital” plus “reserves “. It only requires a little loan to do its business.
These companies during a Sensex fall have the strength to weather the storm. Hence Always analyze the company fundamentals before investing.
Stick To Your Investment Goal
Trading and investing are two very different strategies. Investing is for the long term. As an investor, your motto is to create wealth over the long term.
After a crash, the markets always recovered. But sometimes the impact of the crash has lasted for years.
So When your goal is near, shift to other low-risk asset classes so that you don’t miss the target due to the Sensex fall.
While turning the pages of historical data it is evident that the market has always recovered after a crash & has bounced back higher & stronger. Understand the volatile nature of markets as well as their ability to appreciate over time as economic cycles turn. This will help you to remain invested so that your portfolio is able to benefit from the upturn when it happens.
Sensex points – Historical chart
What If you come out of your investments during a Sensex fall?
You will be marked with losses and will not be able to gain when the market goes up again. Hence it’s best to stay invested.
There’s always something that goes noticed and unnoticed. Here’s an example.
“What gets noticed?
HDFC Bank completed 25 yrs since its IPO in 1995.
A 1 cr investment in IPO is worth 800 Crs today.
What goes unnoticed?
The investor has endured multiple recessions and market fall for 25 yrs.
Stay the course.”
- Do not Borrow and Invest
Do not Leverage, i.e. use borrowed money for an investment expecting profits to be greater than the interest payable. What if it is a loss? You will end up paying interest for the lost money.
A Sensex fall is a catastrophic event for investors. Sensex falls & rallies are an inherent part of the stock market. The historical data implies that after every crash the markets have reached new heights. Hold on tight to investment fundamentals and you can surely surpass it.
“During bull markets, look for the risk;
during bear markets look for the opportunity.
During the bull market,
re-read the lessons learned from the bear market.
During the bear market,
re-read the results delivered from the bull market.”
Emotions play a key role when investing your hard-earned money. During market volatility, emotions can overtake logic leading to derailing the long-term financial plan. Keep in mind the long-term goal & take actions based on that. Investors who stayed the course have ended up the best in the long run.
What if there is a Sensex fall in the future?
Will you make a decision based on your emotions?
Or will you stay the course?
If you made decisions based on your emotions in the past, It’s time you stop doing it that way. It’s time you invest for the long term.
Patience is not the ability to wait but the ability to keep a good attitude while waiting.
If you can hold on & be patient, soon you can reap the harvest. I believe this article will help you make a better decision in case there is a Sensex fall in the future.
If you have any comments or questions, write them in the comment box below.
Or are you interested in creating a Comprehensive Financial Plan for your financial goals?
Skip the queue by registering for your 30 Minute FREE Financial Plan Consultation. Click the ‘Register Now!’ button below.