The concept of a “leap year curse” on the Indian stock market refers to the historical trend where major market crashes have occurred in leap years.
This phenomenon has raised concerns among investors about the potential for a market crash in 2024, which is also a leap year. According to reports, market performance since 1984 reveals average annual returns in leap years to be below 8 percent, compared to 23 percent in non-leap years.
Listed below are the leap years in which the market crashed:
1992:
The Indian stock market crashed by over 50 percent in 1992 when the Harshad Mehta scam was exposed. This crash was one of the biggest falls in the history of the Indian markets and was primarily caused by fraudulent activities done by Harshad Mehta, a stock and money market broker.
Mehta manipulated the market using fake bank receipts and stamp papers, driving stock prices up to 40 times their original value. When the scam was uncovered, it led to a significant disruption in the stock market, resulting in a loss of around 40 percent of the market value or Rs. 1,000 billion.
2000:
The Indian stock market crashed by over 50 percent in 2000 due to the dot-com bubble burst, which had a significant impact on the global economy, including India. The dot-com bubble crash was caused by factors like excessive speculation in technology stocks, lack of government regulation and unrealistic valuations.
The BSE Sensex Index fell by over 50 percent between 2000 and 2002, particularly affecting the Indian technology sector as many companies faced bankruptcy or mergers. Furthermore, by the end of 2001, the Nasdaq Composite Index had lost over 75 percent of its value, leading to a ripple effect on the Indian markets.
2008:
The Indian stock market crashed by over 50 percent in 2008 due to the global financial crisis and the collapse of the American investment banking firm Lehman Brothers. This crash was caused by increased lending to low-income buyers and large risks taken by global financial institutions.
The Indian Index Sensex fell by more than 1,000 points and more than 17 lakh rupees of the investor’s money was wiped out. Moreover, the BSE stopped trading due to a technical fault. By the end of 2008, the Sensex was trading at 9,176, falling from 20,465.
2016:
The Indian stock market crashed by approximately 26 percent in 2016 over eleven months due to various factors. One significant reason was the high level of non-performing assets (NPAs) in the banking sector, which contributed to market instability.
Additionally, disappointing earnings in the first quarter of the fiscal year and a poor monsoon season in India further exacerbated the market downturn in 2016. Moreover, demonetisation, surgical strikes, and US elections created volatility.
2020:
The Indian stock market crashed by more than 20 percent in 2020 due to the outbreak of the COVID-19 pandemic, which had a swift and severe impact on various industries and livelihoods. The fear of the COVID-19 outbreak created havoc all over the globe, leading to a significant decline in stock prices.
Written By Vaibhav Patil
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