The month of May was tumultuous for the Indian stock market. Despite such a big crash, the risk management techniques that are in place averted a major crisis.
May
17, 2004 _ is known as the "Black Monday"
of the Indian equity market. It saw the largest single-day
fall in the Sensex in a decade, and the second highest
of all time. The bouncing back of the market was also
commendable. On May 18, the market clawed back by the
largest number of points in the decade (See Table 1).
The
equity markets were circumspect during the election
time. The Sensex was dancing to the tunes of the exit
polls from April 20 to May 10. When the exit polls predicted
a hung parliament, the Sensex lost a lot of ground.
In just 18 sessions, the bellwether index lost 730 points,
or 12.59%. Then, came what is now described as "Black
Monday".
On
May 17, 2004, the Sensex opened at 5020.89 points, about
50 points lower than it's previous close. At 9:56 a.m.,
a minute after opening, it fell to 4927, and by 9:59
a.m., it touched 4792a fall of 135 points in 3 minutes.
At 10:17 a.m., the Sensex fell to 4516, 553 points or
a full 10% below its previous close. The market-wide
circuit breaker was applied, and all trading was stopped
for an hour. The market was to reopen at 11:15 a.m.
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