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Over 15 Lakh Crore Wiped Out — What Does This Number Actually Mean
₹15 lakh crore means ₹15 trillion. In other words, it means 15 followed by 12 zeros. To make this number somewhat easier to grasp, let's compare it to something. Our country's total defense spending in a year is around Rs. 6 lakh crores. In this single day's stock exchange crash, the amount lost has been more than double that.
Does this mean that this money has somehow vanished into thin air? No. It means that the total value of the combined shares of companies listed on the Bombay Stock Exchange has fallen by this amount. So, if you have shares worth Rs. 1 lakh, today their value might be only Rs. 95,000 or something like that
Why Indian Stock Market Crashed Today
Stock markets do not fall without any reason. Here are the major causes for the market fall today in simple words:
01 US-Iran Geopolitics Crisis – Global Fear Spreading Across the Globe
Rising tensions between the United States and Iran have increased global uncertainty, which has affected investor sentiment. But Iran denied talks and threatened to attack energy facilities in the Gulf region. If there’s trouble in the Middle East, there’s trouble in the whole world. The world’s investors are withdrawing their investments from risky assets and putting their money in safe assets such as gold and US bonds. India, being an emerging market, always suffers when global fear increases. Today, Foreign Institutional Investors sold heavily in the Indian market as a result of global uncertainty.
02 FII Selling – Foreign Investors Running Away
The day saw a massive withdrawal of money from Indian stocks by Foreign Institutional Investors, who are major investors in Indian stocks. These investors take their money back to safer havens like US Treasury Bonds or Gold when there is a rise in international tensions. This causes a huge fall in Indian stock prices. This is considered to be one of the biggest reasons for a huge fall in Indian stock prices on a single day.
03 Rising Crude Oil Prices – Bad News for India
India is a country that depends on oil imports for more than 85% of its oil requirements. Any increase in international tensions in the Middle East leads to a sharp increase in oil prices, which in turn leads to a rise in inflation. This leads to a situation where the Reserve Bank of India has to keep interest rates high, which is bad news for businesses and the stock market as a whole. Today, crude oil prices shot up due to the US-Iran conflict, and Indian markets felt the pinch.
04 Weakness in Global Markets – US and Asian Markets Were Also Weak Today
The Indian stock market is not in a vacuum. Indian markets often react strongly to movements in global markets. Yesterday, the Wall Street market was down overnight due to the Iran conflict and oil prices rising again. Today, the Japanese, Hong Kong, and Korean markets also opened sharply lower. If all the major stock exchanges in the world are down, then Indian investors also become nervous and start selling stocks.
05 Weakening Rupee Against Dollar
When the risks in the world increase, FII sells stocks, and the Indian Rupee weakens against the Dollar. If the Rupee weakens against the Dollar, then the price of oil also rises, as oil prices are related to the Dollar. This is a vicious cycle – a conflict in the world causes FII to sell, which causes the Rupee to weaken, which causes oil to become expensive, which causes inflation to rise, which causes the market to go down even more. Today, all these factors are at play.
06 Panic Selling and Stop Losses Triggered
When the market declines sharply, many investors have set "stop loss" orders. These are orders to sell the stocks automatically when the price slips to a particular level. Today, as the Sensex slipped through key support levels, thousands of stop losses were triggered at the same time. This caused the market to fall from bad to worse.
Should You Buy, Sell or Hold During a Market Crash
This is the most important question. And the answer is – No, you should not panic. And here is why:
Historical Fact: Every single time the Indian stock market has crashed – in 2008, in 2011, in 2015, in 2018, and even in 2020 – it has eventually recovered and gone to new all-time highs. And the investors who did not panic and continued to invest in their SIPs during the market crashes have made the most money.
If You Are a Long-Term Investor (5+ years)
Do nothing at all. Market crashes are temporary. And unless your fundamental investment idea – investing in quality companies or mutual funds for the long term – has changed, your investment idea should not change. In fact, during market crashes, it is historically the best time to invest more.
If You Are a SIP Investor
This is actually good news for you. Your SIP will actually buy more units at lower prices today. And this is called Rupee Cost Averaging – and it is actually in your favor during market crashes.
If You Are a Short-Term Trader
Be very careful. In a volatile global environment, markets can swing wildly in both directions. Ensure that your stop losses are in place and you are not over-leveraging.
What to Watch in Coming Days
The direction of Indian markets in coming days will entirely depend upon how the US-Iran tensions ease out or further escalate. If tensions ease out, a sharp recovery rally is expected, while if tensions escalate further, especially in terms of a military strike, selling is likely to continue.
Simple Explanation — For Those New to Investing
The stock market is like a huge market where companies are traded in smaller parts, known as shares. The price of a share goes up and down depending on people's expectations about the future.
Imagine you have a share in a company, and something bad happens in the world, like a war between the US and Iran. You get scared and think, "Oh no, businesses will be badly affected, and everything is going to get very expensive, including oil." So, you sell your shares immediately to save your money.
When such a huge number of people are selling at a time, naturally the prices fall. This is what happened today. This figure of 15 lakh crore rupees did not just disappear. This simply means if you were to aggregate all the prices of all shares in India today compared to yesterday, you would have 15 lakh crore rupees less.
The key thing to remember here is this happens regularly. And historically, Indian markets always recover.
Frequently Asked Questions
Is my money in mutual funds safe?
Yes. Your money is safe in mutual funds. They are regulated by SEBI. Your money is not lost; it’s just that the value of your investment has gone down for a while. But if you are an investor for the long term, Indian markets always recover from a crash.
Why does Rs. 15 lakh crore disappear in such a short time?
Because the price of stocks depends on the combined expectations of millions of investors. So when there’s a scare, everyone wants to sell at the same time. That’s why the price goes down very quickly. Just as the price goes up quickly when there’s good news, it goes down quickly when there’s bad news.
Should I sell all my assets immediately?
Only if you really need the money immediately. If you sell during the crash, you will be locking in your losses. In fact, investors who have gone through crashes and continued to invest in SIPs are far more profitable than investors who sell their assets during the crash.
Will the market recover?
The answer is yes, based on past data. The Indian economy is in good shape. Every previous market crash has been followed by a market recovery. However, the timing of the market recovery will depend on the way things are going globally, specifically the US-Iran crisis.
Is this because of the US-Iran crisis?
This is one of the major reasons for the market crash today. The rise in crude prices and the outflow of FII due to fear of global events are major factors for the market's decline today.
Conclusion — Stay Calm, Stay Invested
It was a very painful day for Indian Investors today. Watching 15 lakh crore Rupees disappear from the market in one single session is indeed a very alarming situation. But one should keep in mind that there is a bigger picture in this scenario.
Markets crash, markets go up, and markets go down. What makes a smart and successful investor is one who stays calm in a market crash, stays invested, and does not sell his/her shares in a panic situation.
The factors that caused this market fall, such as global geopolitical tensions, FII outflow, and crude oil prices, are indeed valid factors. But they are also temporary factors, and India's economic growth story is still intact.
NextLevelFinstra is always there to keep you updated about this situation, and you should stay informed, think smart, and reach the next level!
Disclaimer: This article is for informational and educational purposes only. All information is based on publicly reported news headlines available at the time of writing. This does not constitute financial or investment advice. Past market performance is not indicative of future results. Please consult a qualified financial advisor before making any investment decisions. — NextLevelFinstra
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