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Turbulence on Dalal Street: Unpacking the Indian Stock Market Crash: Part 2

Hello guys, and welcome to the second edition of Analyzing the Stock Market Crash journey. Today we are going to dig deep into the What Triggers a Stock Market Crash? 

So, let's go:

A stock market crash isn’t a random event — it’s often the result of a combination of factors coming together at the wrong time. Let’s explore some major reasons:

  1. Global Economic Slowdowns: India’s market is closely tied to global economic trends. A slowdown in major economies like the US or China often results in reduced investor confidence.

  2. Political Instability and Global Conflicts: Political developments, like Prime Minister Narendra Modi’s economic reforms and global events like the Ukraine war, add to uncertainty. The war has disrupted global supply chains and led to rising oil and commodity prices, putting pressure on emerging markets like India.

  3. Trade Wars and Tariffs: Former US President Donald Trump’s tariffs on Chinese goods had a ripple effect on global trade, raising costs and reducing demand. India wasn’t immune to this pressure, facing disruptions in both exports and imports.

  4. Inflation and Interest Rates: High inflation and rising interest rates can lower corporate profits and reduce spending power, pushing stock prices down.

  5. Investment Funding Slowdown: With rising global economic uncertainty, venture capital and institutional investment slow down, leading to liquidity issues in domestic markets.

  6. Corporate Scandals: Fraud or mismanagement in major companies can lead to panic selling, dragging the entire market down.

  7. Pandemics or Natural Disasters: Unforeseen events like COVID-19 demonstrated how global health crises can shake financial systems worldwide.

For a deeper dive on how global conflicts affect financial markets, check out this analysis by Reuters — though the link seems currently inaccessible. You can also explore insights on Bloomberg and Economic Times for up-to-date coverage.

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