India’s stock markets, often seen as a barometer of the economy, have weathered many storms over the decades. April 7, 2025, marked yet another jolt as Sensex and Nifty tumbled nearly 4 percent, spooked by growing fears of a trade war triggered by US President Trump’s reciprocal tariffs and China’s counteractions. While the drop was steep, Indian equities have witnessed far worse in the past, shaped by scams, global crises, and political uncertainties.

Here are five of the biggest stock market crashes India has faced and what caused them.

1. The Harshad Mehta Scam – 1992

One of the earliest and most infamous events in India’s market history was the Harshad Mehta scam in 1992. Known as the “Big Bull,” Mehta used loopholes in the banking and Bombay Stock Exchange systems to siphon off money and artificially inflate share prices.

• Using fake bank receipts (BRs), he diverted funds into stocks of select companies, causing their prices to skyrocket by as much as 4,400 percent.

• The BSE Sensex surged from 2,000 in January 1992 to over 4,000 by March 1992.

• Once the scam broke, confidence evaporated and Sensex fell nearly 13 percent on April 28, 1992, which was then the biggest single-day drop.

• Over the next year, Sensex plunged 56 percent and it took the market two years to recover.

This event shook investor confidence, led to tighter market regulations, and remains a watershed moment in India’s financial history.

2. Global Financial Crisis – Lehman Brothers Collapse in 2008

The 2008 financial meltdown, caused by the collapse of US banking behemoth Lehman Brothers, sent tremors across the globe and hit emerging markets like India hard.

• On January 21, 2008, the Sensex crashed 7.4 percent in a single day as panic spread.

• Over the year, Sensex, Nifty, and Nifty 500 all plunged more than 60 percent from their peaks.

• Foreign investors pulled out large sums, leading to massive outflows and plummeting equity values.

The Indian markets took nearly three years to stabilize and bounce back, showing their resilience but also their vulnerability to global macroeconomic shocks.

3. COVID-19 Market Crash – 2020

The outbreak of the COVID-19 pandemic in early 2020 created unprecedented uncertainty. As the government enforced nationwide lockdowns, business activity froze, impacting demand, supply chains, and investor sentiment.

• From January to March 2020, the Sensex crashed over 39 percent, reaching a low of 25,639 on March 23.

• On that same day, Sensex nosedived 13 percent, marking one of its worst intraday falls ever.

• Investor fear was palpable, with redemptions and panic selling widespread.

However, this period also marked the beginning of retail investor participation in India, with a strong recovery led by domestic investments and renewed global interest.

4. Lok Sabha Election Result Shock – 2024

While elections often bring volatility, the 2024 Lok Sabha results caused an unexpected shock to markets.

• Exit polls had predicted a strong win for BJP, sending Sensex and Nifty to record highs on June 3, 2024.

• However, results on June 4 showed that BJP fell short of a majority, even though the NDA alliance managed over 290 seats.

• This mismatch between expectation and reality triggered panic selling. Nifty dropped 5.93 percent, and Sensex fell 5.74 percent—their worst single-day fall since March 2020.

• Intra-day, both indices had fallen more than 8.5 percent, wiping out trillions in investor wealth.

This crash highlighted how political instability and policy uncertainty can shake investor confidence even in fundamentally strong markets.

5. Trump’s Reciprocal Tariffs – 2025

The most recent addition to this list came in April 2025, as global markets reacted sharply to escalating trade tensions between the US and China/EU.

• US President Trump imposed reciprocal tariffs on imports, with China and the EU responding in kind.

• These developments sparked fears of a global recession and a slowdown in global trade.

• Indian markets mirrored global anxiety. On April 7, 2025, Sensex fell by 4 percent to around 72,485, and Nifty dropped by nearly 1,000 points, hovering near 22,000.

• The selloff wasn’t limited to equities—crude oil, precious metals, and global indices also fell, showing broad-based investor panic.

This incident reaffirms how external geopolitical and economic events can ripple across economies and spook markets.

Conclusion: Crashes Are Lessons in Market Psychology

While each crash has its own origin—be it scams, elections, pandemics, or global events—they share a few common traits:

• Fear-driven investor behavior, often triggered by uncertainty or broken trust.

• Massive selloffs by institutional and foreign investors, especially during global risk events.

• Eventually, recovery, led by a return of investor confidence, policy support, and long-term growth drivers.

These events teach us that volatility is part and parcel of equity investing. For long-term investors, crashes often become buying opportunities. However, risk management and diversified investing are crucial.

As we move forward from the 2025 crash, it will be important to observe how global trade negotiations and domestic economic resilience shape the recovery story.

The Upcoming IPOs in this week and coming weeks are Aten Papers & Foam.

The Closed IPOs are  Infonative Solutions Limited, Spinaroo Commercial Limited,Retaggio Industries Limited.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in .Choice Broking FinX