Cause crash market stock
Stock market crash is the sudden loosing of huge levels by the stock market index in a trading day. For example, if any stock market index is trading at levels of 5000 and in one single trading day, it looses 10% to come down to 4500, it is said that the stock market has crashed. Whatever is the reason; as we would be discussing various reasons for stock market crash, all those people that have invested in the stock market by way of different types of stocks suffer huge losses.
Stock markets over the world have crashed many times and they took decades to recover from that level. The stock market crash results in many types of processes. For example, when stock market in United States crashed in October 1929 on 24th, also called as black Thursday, it resulted in Great Depression. Many people who were made billionaires due to the rally in the stock market were converted to beggars in no time.
Causes of stock market crash:
There are many reasons for which the stock market crashes. It is important to understand that huge selling in stocks traded at the stock market results in stock market crash. If the stock market is rallying for the past some months and is achieving high and high levels, especially because of foreign institutions investing more and more funds into the market, at a certain time of point, when it is overheated, the stock market starts loosing heat and this results in stock market crash due to huge selling by public at large that has invested in the stock market. If the foreign institutional investors have invested huge money and they take it out of stock market immediately, this is coupled by domestic investing institutions selling stocks greatly and public at large also reacts to it in the same manner. This huge overall selling results it the crash of stock market.
Next reason for which the stock market can crash is various types of reports given by various departments of government that affect the economy. Let us discuss it with the help of an example. If the government comes out with a report that economy has slowed down, or industrial production has slowed down drastically in the past year, it would have deep impact on the stock market and since the stock market is driven mostly by the sentiments, it can result in huge selling as most of people would like to book profits at the current levels and would like to come out of it as soon possible. This in turn would result in the stock market crash.
Political instability is one of biggest causes of stock market crash. When any country becomes political instable, the stock market is the first to react sharply to it and various investing institutions start booking their profits or minimizing their losses. This factor is reacted sharply by the foreign investors and they can take out they money invested in a single day and this would definitely give rise to stock market crash. For example, if the government at the federal or national level is toppled down or fails to work as per the constitution or mid term elections are declared by the government, it is quite likely that the stock market would get a huge blow. If the government is a formed by different regions and national parties, there can be a conflict any time on any issue and it might be the case that one or more parties withdraw their support to government that results in breakdown of government machinery. If such things happen, the stock market crash can occur.
International factors are also one of important reasons of stock market crash. If the economy of any developed country suffers due to any factor and stock markets there gets crashed or loose great points, it has immediate affect on stock markets across the world. For example, recently the economy in United States got a blow then the reports concerning sub prime lending were made public. This resulted in huge blow down at the stock market in U.S and not only this, stock market across the world reacted to this. Most stock market indices like Bombay Stock Exchange in Indian, Hang Sang, etc were down greatly in a single day, which was a sort of stock market crash. If any events like World War etc again happen, the stock market across the globe would be crashed in no time. Similarly, if there is any announcement that huge aids provided by international monetary agencies or developed nations have been withdrawn, it can result in stock market crash.
Other important factor due to which a stock market can crash is the unearthing of frauds or manipulated investments in the stock market. If it is unearthed that there had been a huge fraud in investing in different types of stocks due to which it has gained high levels, the stock market would take no time to crash down. Not only the stocks that were manipulated but also the other stocks also react very sharply to this type of news. For example, when the frauds committed by Harshad Mehta were unearthed in India, it resulted in a great stock market crash.
Last but not the least, the announcement of financial numbers by big business houses and industries can also bring about a crash in the stock market. It has happened many times in the past when the stock market has reacted very sharply to the poor numbers announced by the big business houses and industries and stock market has crashed down. This is because apart from a particular company declaring the results, all the stocks reacted in the same manner and it results in the stock market crash.
Is the stock market crash and opportunity to buy:
The question that has to be answered here is, Âdoes the stock market crash offers one of best buying opportunities to an investor? The answer to this question is not easy to give. It depends upon the factor due to which the stock market has crashed. If it has crashed because of big company announcing bad numbers, it can be said that it is a good opportunity to buy stocks. If the stock market crash has been due to political instability, it might take some time for the stock market to get support and thus, a person should wait. d numbers, it can be said that it is a good opportunity to buy stocks. If the stock market crash has been due to political instability, it might take some time for the stock market to get support and thus, a person should wait.0ther articles
