Stock Market Crash: 6 Possible Reasons Behind The Wednesday Crash

Stock Market Crash: 6 Possible Reasons Behind The Wednesday Crash

After a long weekend, the market opened on a reasonable stable note, but as we progressed further into the week, the markets nose-dived into the 'red sea'.

Juviraj AnchilUpdated: Thursday, March 14, 2024, 12:05 PM IST
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Representative Image | Wikimedia

After making major gains in the last week of February, the markets got off to a rocky start in the third month of the calendar year, and most importantly, the last month of the fiscal year in the country.

After a long weekend, the market opened on a reasonably stable note, but as we progressed further into the week, the markets nose-dived into the 'red sea'. On March 13, the Sensex lost a colossal 906.07 points or 1.23 per cent. Meanwhile, the Nifty slumped 338 points or 1.51 per cent.

Now, many are ruminating over the possible reason(s) behind this turmoil. Some of the aspects that are underscored in the discourse than other.

Allegations of Price Manipulation

Madhabi Puri Buch, the head of the regulatory body of the market, SEBI issued a statement, that garnered traction at the beginning of the week. In her statement, Buch raised her concerns over alleged manipulation conducted by SME or Small-to Medium Enterprises. This statement had a ripple-effect on Dalal Street as mid-cap and small-cap companies suffered.

According to some market observers, This statement further heightened panic. SEBI's suggestion of potentially implementing stringent regulations added to the apprehension.

The previous session also saw big-wigs like Adani and its constituent companies losing a lot of its value as well, nevertheless, on Thursday's early trade, the company appears to have ostensibly bounced back from all corners.

March Effect

Another possible reason behind the slump could be, what is termed as the March Effect, which in itself has three crucial components to it.

March, as mentioned before, March is the last year of the financial year, and this therefore is a rather consequential year for experienced investors, institutions, and non-accredited investors alike.

Need For Resources

At this time of the year companies look for tangibility in the their ranks would elude from putting their resources in any kind of jeopardy or added risk. This therefore may result in companies pulling out of 'risky' ventures to consolidate their balance sheet and supply confidence to their current and potential/ future investors, by being able to produce 'profits' on paper.

The Taxman Calling

Mid march, more precisely March 15, is when the last day for the payment of 100 percent of your advance tax for the year comes to pass. For smoother operations, both individuals and corporates would desire for greater liquidity, which in turn may see, greater than usual number of individuals/corporates withdrawing their greens from companies, in order to use those resources for paying taxes.

The Balancing Act

After a year of arduous trading, many investors would look to gauge the performance of their holdings by sifting the wheat from the chaff. This would result in closer look at their portfolios, which in turn would mean offloading stocks that are not working for them, and also laying emphasis on those that are working and on those, that may get them greater yields.

Electoral Bonds: The Unconventional Bonds

The recent development surrounding the Electoral Bonds has seeped into multiple realms. The Supreme Court order, that trashed the SBI plea of delaying the process of the revelation of donors and the recipients has resulted in many being impacted, including SBI itself. The largest lender in the country has seen its shares drop by nearly 6 per cent. The end result and what the documents might end up disclosing has many on their toes, instating a field for more panic-selling in companies, which may be directly or in-directly be impacted by the details, which are eventually disclosed on March 15, by the Election Commission of India.

Global Factors

Another facet of the realm, that may have, and could possibly further influence the markets, are the factors outside of the territory of the sub-continent. The US markets and the prime indices including S&P 500 and Nasdaq have been on the decline through out this week after riding high on Nvidia and Tech-related boom for the last week of February, along with the first week of March. It is not just Uncle Sam, but Asian markets including the all-important Nikkei, which has been trading in deep red, after scaling the highest peak of 40,000 points. The recent news revolving around the jump in the US inflation rate number and the subsequent commotion surrounding interest rate change by the Federal Reserve could also be one of the reasons having a ripple-effect on the Indian Markets.

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