Market Crash
A sudden, severe fall in prices across a market, typically over days rather than months.
Formula
Test: a broad index falls sharply within a very short period, usually accompanied by a spike in volatility and volume
Unit
%
In depth
Crashes are distinguished from bear markets by speed rather than depth, and their mechanics involve forced selling — margin calls, redemption pressure and stop-loss cascades — which turn a price fall into a liquidity event. Correlations rise toward one, so diversification within equities provides little protection, and circuit breakers exist to interrupt the feedback loop. India's market fell about 38% in roughly a month in early 2020, which is a crash by any definition. Recovery timing has varied enormously across historical episodes, and nothing here predicts either the occurrence or the recovery of any such event.
Worked example
An index falling 13% in a single session triggers the market-wide circuit breaker at 10% and again at 15%. Leveraged positions face margin calls the same evening, which supplies more selling the next morning.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Market Crash” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.