We all know about the unpredictable nature of stock market. There are several reasons when the stock market go high and touch the sky, similarly there are reasons which make the stocks market fall. The major fall in the stock market comes when there is an unnecessary hike in prices of stocks in a very short span of time. Stock market falls generally when the stocks listed in large cap index that is the index which has stocks of all the big companies. When stock prices of the top companies which are included in large cap index start falling, stock market as a whole will take the downward trend. It is very important that corrections should take place in stock market at regular intervals because if the market will keep on rising people will lose interest and the downfall is the time which attracts new investors to participate in the investment of stock market.
There can be several reasons which are responsible for the fall of stock market and can be listed as:
a) Pressure of inflation always tends to move the stock markets down.
b) There is a fear of hike in prices which also provokes the stock market towards its downfall.
c) Weak growth of industry can also take stock market towards downfall.
d) Scandals and scams like the one done by Harshad Mehta in 1991-1992 can prove to be one of the reasons.
e) Changing policies of government regarding tightening of domestic and foreign trade can prove one of the reasons for the fall of stock process.
f) Introduction of new policies by Reserve Bank of India can also lead stock markets towards its downfall.
g) Sometimes some new announcements made by SEBI i.e. Securities Exchange Board of India make a noise in stock market in such a way that the prices of stock start falling which ultimately lead to the fall of stock market.
h) Stock market tend to fall abruptly when foreign investors start selling their stocks in our market due to political instability or any other new policy intervention.
i) Sometimes wrong news in the Market conveys wrong things to its investors due to which they start selling their stock at a faster rate which lead towards a disastrous fall in the stock market.
j) Sometimes Reserve Bank of India increase the value off Cash Reserve Ratio i.e. CRR which can be responsible for the downfall in stock market.
k) Global economies also effect our Indian stock markets in one way or the other due to which fall in any of the global economy can make our Indian stock market fall too.
l) Interest rates movements can also be one of the reasons for the downfall of the market.
m) Sometimes due to natural disasters like droughts and heavy rain fall also have a bad impact on markets which lead their way to the downfall.
n) In case of situations like wars, markets can fall as people feel insecure about their money and start selling their stocks at a faster rate.
o) Terrorism is also one of the other factors which create fear in mind of people and there is a state of terror in country which stops people in investing in stocks.
p) Increased rate of fraud and high rate of crime also pave the way to the downfall of the stock market in India.
In order to conclude this topic we can say that, it is best time for the investors who want to buy stocks because when the markets are following the downward trend, prices of stocks go down abruptly. At this point of time when the markets are following a downward trend sellers want to sell their stocks at any price which they are getting in order to save themselves from loses while the buyers wait for the lowest prices to buy the stock and they wait the stock to reach its lowest point in order to buy that stock. Whenever there is a fall in stock market, nobody can predict that whether this is due to minor fluctuations or major fluctuations and this is a temporary downfall or going to last for some longer period of time. So an investor should be careful while taking the investment decision whenthe stock markets are going southward trend.