Nasdaq tumbles: A look back at the biggest stock market crashes

With Nasdaq's steep fall reigniting recession fears, we look at history's biggest stock market crashes-from the Great Depression to demonetisation-and their causes

US stock markets witnessed a sharp decline on Monday, with major indices tumbling after former President Donald Trump’s recent comments fuelled fears of an economic downturn. Investors reacted negatively, leading to one of the worst trading days in months.

 

The S&P 500 dropped 155.64 points, a 2.7 per cent decline, closing at 5,614.56—its lowest level since September and its steepest single-day percentage drop since December. The Nasdaq Composite, heavily weighted towards technology stocks, plunged 727.90 points (4 per cent) to close at 17,468.32, its lowest since September.

 

Meanwhile, the Dow Jones Industrial Average (DJIA) fell 890.01 points (2.08 per cent) to 41,911.71, marking its weakest close since early November.

 

 

Over the weekend, Trump was asked in an interview with Fox News Channel whether he foresaw a recession in 2025. His response, while not a direct confirmation, hinted at economic turbulence ahead.

 

“I hate to predict things like that. There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing,” he said. “It takes a little time. It takes a little time.”

 

Investors fear that escalating trade tensions could push the US economy into a recession. While market corrections are not uncommon, steep declines like this have historically had multiple causes. Here’s a look at past financial crises that shook markets worldwide.

 

Major market crashes in the US

 

The Great Depression (1929)

Triggered by the Wall Street crash of 1929, the Great Depression severely impacted the global economy. The DJIA plunged nearly 25 per cent over two days (October 28-29). By mid-1932, the market had declined 89 per cent from its peak. The crash was fuelled by rampant speculation, excessive borrowing, and economic instability, leading to mass unemployment, food shortages, and widespread poverty.

 

Black Monday (October 19, 1987)

One of the most dramatic market crashes in history, Black Monday saw the DJIA plunge 22.6 per cent in a single day—the largest one-day percentage drop ever. Months of rapid stock gains had led to fears of an asset bubble, while a growing trade deficit and a weakening dollar further rattled investor confidence.

 

Dot-com bubble burst (March 2000 - October 2002)

The dot-com bubble burst after a period of rapid growth in IT and telecommunications. The rise of the internet led to an explosion of online businesses, attracting heavy investment. However, after peaking in March 2000, the Nasdaq crashed by about 78 per cent by October 2002 due to excessive speculation and failing tech startups.

 

Post-9/11 market reaction (September 2001)

Following the terrorist attacks on September 11, 2001, US stock markets remained closed for nearly a week. The destruction of the World Trade Center, a key financial hub, caused nearly 3,000 deaths and sent shockwaves through the economy.

 

The airline and insurance industries were hit the hardest. With flights grounded for days, airline stocks saw steep losses. American Airlines and United Airlines, which operated the hijacked flights, suffered massive declines. The insurance industry also faced billions in claims, leading to a liquidity crisis for several firms. 

Global financial crisis (October 2008)

The collapse of Lehman Brothers in September 2008 triggered a worldwide financial crisis. The Nasdaq, along with other major indices, experienced multiple days of declines exceeding 10 per cent. The crisis was driven by the collapse of major financial institutions, largely due to risky subprime mortgages and frozen credit markets. Banks, including those in the US and Northern Rock in the UK, had adopted a model where they originated and sold mortgages, packaging them into mortgage-backed securities (MBS) and collateralised debt obligations (CDOs). In 2007, Northern Rock faced a run on deposits, which ended only when the UK government guaranteed them. In September 2008, Lehman Brothers filed for bankruptcy, plunging the global financial system into crisis. Government bailouts and stimulus measures were required to stabilise the financial system.

 

Covid-19 market crash (March 2020)

The Covid-19 pandemic caused extreme market volatility, with repeated 10 per cent+ drops in March 2020. Lockdowns, economic uncertainty, and investor panic led to trading halts.

 

Major global market crashes

 

2015 Chinese stock market crash

Between June 2014 and June 2015, China’s Shanghai Composite Index surged 150 per cent, fuelled by speculative trading. By mid-2015, the bubble burst, causing a 32 per cent drop in a month and an overall 40 per cent decline.

 

2022 Russian stock market crash

Following Russia’s invasion of Ukraine, the Moscow Exchange (MOEX) index fell 43.58 per cent in just four trading days in February 2022. Western sanctions and economic uncertainty fuelled panic selling, prompting Russia’s central bank to halt trading temporarily.

 

Major stock market crashes in India

 

1865 cotton boom and bust

One of India’s earliest market crashes was in May 1865, a decade before the Bombay Stock Exchange was incorporated. It was caused by excessive speculation in cotton exports during the American Civil War. When the war ended, cotton prices collapsed, triggering a severe market crash. Mumbai’s economy suffered, and its population declined by 21 per cent over the next few years.

 

1982 Reliance short-selling crisis

A bear cartel attempted to crash Reliance Industries’ stock by offloading shares, driving prices down. In a few days, Reliance’s share price dropped sharply. However, a counter-group known as the “Friends of Reliance” bought up shares, reversing the trend and stabilising the market.

 

1992 Harshad Mehta scam

Stockbroker Harshad Mehta manipulated stock prices using fraudulent bank funds, inflating the BSE Sensex from 1,000 to over 4,500 points. When the scam was exposed, the market crashed by nearly 2,000 points, wiping out ₹1 trillion in investor wealth.

 

2008 global financial crisis impact on India

The 2008 crisis led to foreign investors pulling out of Indian markets. The Sensex lost over 50 per cent of its value that year, with banks and financial stocks taking the worst hit.

 

November 2016 demonetisation

The Indian government declared ₹500 and ₹1,000 notes would no longer be legal tender, causing a market shock. The BSE Sensex crashed nearly 1,689 points, while the NIFTY 50 fell 541 points.

 

March 2020 Covid-19 pandemic crash

The Covid-19 outbreak led to panic selling across global markets, including India. The Sensex and NIFTY saw record single-day drops as lockdowns and economic fears spooked investors.