Stock market to crash: Why the stock market crash happens?

Stock market to crash: Why the stock market crash happens?

A share market crash occurs when the stock index falls severely in a day or two of trading. Market volatility is a fact of life in the stock market, the prices of equities and broad indices rise and fall, resulting in turbulent volatility in the short term as well as the long term in the market. A stock market crash occurs when indexes experience rapid double-digit declines. There is no specific decline percentage that can accurately define a stock market crash today, unlike a bull market and a bear market.

Why does a share market crash happen?

Stock market crashes usually occur at times when the economy is overheating, inflation is rising, when market speculation is high, and when there is a lot of uncertainty about the direction of the economy. Because of these, stock market crashes often start with a trickle and end as a disaster as investors look for a quick quit or exit option. Due to the formidable interactions of bull runs, bear runs, and stock market bubbles, it can crash in an unfortunate way.

Bull market

This is when investors are too optimistic about the market and the economy when demand exceeds supply increasing share prices. It can last for 2-9 years. It requires only one significant market event to create a crisis of confidence and attract more sellers to the market.

Bear market

It often develops after a stock market crash. In this, investors become pessimistic and start selling shares which results in a fall in prices as the supply starts to outstrip the demand. The result of the stock market losing 20% ​​of its value in 52 weeks is known as a bear market. It mostly lasts around 4 years or less.

Stock market bubble

When investors begin to operate in a herd mentality and tend to buy stocks in a group, it tends to inflate and burst, causing prices in the market to rise and go unreasonably high. When this bubble bursts, the stock market goes into a crash.

Effect of fall in the stock market

A stock crash can cause a bear market, that is when the market declines 10 percent for an overall decline of 20 percent or more beyond a correction. A fall in the stock market can lead to a recession. If stock prices decline to a greater extent, the corporates have less ability to grow which will result in bankruptcy. A fall in demand eventually leads to lower revenues resulting in more workers being laid off, so the decline continues and the economy contracts, as a result, creating a recession.

What should you do in the event of a stock market crash?

You only need to be aware of your own risk in the market and check if you are highly leveraged as a margin investor. Also, see if your investment portfolio is overloaded with riskier growth stocks or other more speculative stocks. So, be thorough about your portfolio and take the following steps with the help of stock market professionals:

•After researching good stocks, adjust accordingly.

•Spread your risk by diversifying your portfolio.

•Buy when others sell.

•Be calm because bear markets disappear quite quickly and bull markets last for a very long time.

Stock Market Crash 2019 – 2020

Everyone has just seen a stock market crash. Which came during the Corona period. A lot of markets had fallen from him in one stroke. Its main reason was due to the lockdown, and the global disaster ie Corona disease.

And now we all see, India’s stock market is recovering soon and making its all-time high. This means here that the market recovers very quickly after a crash. Rises even more rapidly and makes new highs.

Leave a Comment