Sensex loses 30% twice as fast as 2008 crash!

The Sensex has lost 30% of its value in just 18 days! Here is how this compares with other major crashes in the past

Published: March 18, 2020 at 5:19 pm

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The Sensex has lost 30% of its value since 20th Feb 2020! This is the second-fastest loss of 30% in the history of the Sensex. It took significantly longer during the 200 dot-com crash and 2008 housing crisis!

This is the sequence of daily Sensex returns from Feb 20th 2020:  -0.37%, -1.96%, -0.20%, -0.97%, -0.36%, -3.64%, -0.40%, 1.26%, -0.55%, 0.16%, -2.32%, -5.17%, 0.18%, -8.18%,  4.04%, -7.96%, -2.58%, -5.59%.

To get a perspective of the current fall, we need to look at the history of the Sensex. The price has to be plotted in log scale so that are past bull and bear runs can be set on the same scale.

Sensex closing price in log scale with arrows marking some of the biggest falls
Sensex closing price in log scale with arrows marking some of the biggest falls

The advantage of the log scale is the size of both double-headed arrows are the same. It can help gauge the extent of up and down movements. If we plot the x-axis also in log scale we can evaluate the time for these as well. Read more: Are you ready to climb the Sensex Staircase?!

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The biggest falls in the Sensex are marked by fat down arrows. These represent the Harshad Mehta Scam (April 1992), Dot Com crisis (Deb 2000), 2008 Housing crisis (Jan 2008) and what we shall refer to as the Feb-Mar 2020 fall

This market crash is 6 times faster than the 2008 crash to a 30% fall
This market crash is 6 times faster than the 2008 crash to a 30% fall

During the unfolding of the Harshad Mehta scam, the market lost 30% in eight days!! It recovered a bit only to hit the 30% level in another 10 days (18 days since April 22nd 1992),

During the 2000 dot-com crisis, the 30% loss mark took 68 days. During the current crisis, it took just 18 days, almost 4 times faster. During the 2008-housing crisis, the market lost 29% in 47 days, rebounded and hit the 30% loss mark again 109 days since 10Jan 2008.

This 47 days to a 29% fall is the reference in the title. The current crisis has led to a 30% fall 2.6 times (47/18) faster than 2008-crisis. If you count the exact 30%  loss it is 6-times faster (109/18)!

For the sake of our wealth, let us hope no new records are set in the coming days! Interesting days ahead. Time to understand why we say Mutual funds have no compounding benefit, appreciate risk and learn how to reduce portfolio risk.

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Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
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2 Comments

  1. Indeed interesting times… 2008 was my first crash & i did pump in as much as i could in 2008-11/12 & as recent as my annual fin health check in Dec 19/, everything looked in order & in line with my planning.. this has been a rude reminder that i am only older but not wiser .. … need to lick wounds again, learn to trust my instincts again & get back on track sooner 🙂

  2. Thinking on similar lines, comparing the 2008 one. Not in terms of percentage fall, but how far in terms of years that the fall takes us through.

    From 2008 start, we went back by 2 years. And it took one year from Jan 2008 to Jan 2009 to take us back to Jan 2006 levels. And now in a span of one month, we went back by approx 5 years.

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