Tsunami in the stock market! 5 major reasons caused the crash, investors lost 10 lakh crores

There was a huge decline in the stock market of the world including India on Friday, the last trading day of last week. This trend continued on Monday as well. Sensex and Nifty fell heavily due to reasons like US uncertainty and geopolitical tensions. Investors sold in most sectors. Shares of big companies fell like a pack of cards and investors lost millions of crores of rupees.

There was a huge decline in the stock market of the world on Monday. Japan's Nikkei 225 saw the biggest decline since 1987. Nikkei closed at 31,458.42 with a decline of 12.40 percent i.e. 2227.15 points. At the same time, in 1987, Nikkei fell 4451.28 points in a single day. It is called Black Day in terms of stock market. If we talk about India, today both Sensex and Nifty fell more than 3 percent at one time. However, later there was some recovery in them.

Let us know why there was such a big fall in the Indian stock market and how much loss did the investors suffer.

Threat of recession in America

After the unemployment figures in America came weaker than expected, many experts are fearing recession. Big American investors like Warren Buffett have increased their cash reserves by selling heavily in July. The presidential election in America has also increased political uncertainty. Due to all these factors, there was a big fall in the US stock market on Thursday and Friday, the effect of which was seen on the markets around the world today.

Iran-Israel tension

Tensions between Iran and Israel are constantly increasing. Many reports are claiming that Iran is planning an attack on Israel along with its allies. Crude oil can be most affected by this crisis. Also, there is a risk of increasing trade uncertainty. Due to this, the morale of Indian investors has weakened.

Japan's Yen Crisis

Due to low interest rates in Japan, many traders borrowed Japanese Yen and converted it into Yen and bought American stocks with it. But now the Bank of Japan has increased the interest rates. This has strengthened the Yen against the dollar. This means that traders will have to pay more interest on the borrowed Yen, and they are also facing huge foreign exchange losses. Due to this, they are selling, which is affecting the markets around the world.

High market valuation
Last week, the valuation of the Indian stock market reached 150 percent with a record jump in GDP ratio. Experts say that liquidity is constantly coming into the Indian stock market. This means that investors, especially retail investors, are constantly investing money. Due to this, many mid and small cap stocks have become overvalued. This is also a major reason for the decline in the stock market, which is also called correction.

Weak results of companies

The quarterly results of most of the companies in the country were weaker than expected, while the valuation of their stocks was high. To prove the valuation reasonable, the companies needed to give strong results. When this did not happen, the enthusiasm of the investors started to cool down. Now the investors do not have any new trigger point due to which they should invest in the stock market.

Loss of 10.24 lakh crores
On Monday, in the stock market tsunami, the market cap of all the companies listed on BSE has fallen drastically. Investors lost Rs 10.24 lakh crores. There was a big fall in the stock market on Friday as well. On that day, investors suffered a loss of 4.56 lakh crores. Companies like Tata Motors, Tata Steel, Mahindra & Mahindra, Maruti Suzuki and JSW Steel have suffered the biggest blow. There has been a decline of up to 6 percent in them.