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Turbulence on Dalal Street: Unpacking the Indian Stock Market Crash: Part 1

Hello, readers in today's blog we are going to have a look into the Indian Stock Market Crash that occurred on Feb 11,2025. So, let's get ready to rumble:

Part 1: Understanding Market Crashes and Key Metrics

The Indian stock market has long been a reflection of the country’s economic sentiment — a dynamic space where optimism and fear collide. But when the market takes a nosedive, it sends shockwaves across the economy, impacting investors, businesses, and everyday citizens alike. In this blog series, we’ll dive into the causes, impact, and lessons from one of these turbulent times.

What Exactly Is a Stock Market Crash?

 A stock market crash is typically defined as a rapid and often unanticipated drop in stock prices, usually over a period of 1 to 4 months. During a crash, the market loses a significant percentage of its value — sometimes over 20% — creating panic among investors. Historical crashes, like the Harshad Mehta scam of 1992 or the COVID-19 market collapse in 2020, saw major indices like the Sensex and Nifty plummet within days.

As Nikhil Kamath, co-founder of Zerodha, once said: “Volatility is an inherent part of the market, but the key is to stay calm and think long term. Panic never made anyone rich.”

Key Metrics to Watch During a Crash

  • Sensex and Nifty Movement: A fall of over 10-20% within weeks often signals a crash.

  • Volatility Index (VIX): Also known as the "Fear Gauge," a spike in the VIX shows increased investor anxiety.

  • Foreign Institutional Investor (FII) Activity: Heavy sell-offs by FIIs often exacerbate market declines.

  • Rupee Exchange Rate: A weakening rupee during a crash reflects loss of investor confidence.

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