Markets in a bear grip: SENSEX, NIFTY50 log worst monthly fall since COVID-19; a look at past crash and recovery cycles

The bears continued their dominance on Dalal Street on Monday, March 23, amid weak global cues due to the ongoing war between the US and Iran.

The benchmark indices, SENSEX and NIFTY50, posted their worst monthly performance exactly six years after the headline indices clocked their worst monthly performance on record when COVID-19 pandemic-related lockdowns were announced across the country.

The SENSEX and NIFTY50 have crashed (from February 20, 2026, till today's intraday low) as much as 12.3% and 12%, respectively. Six years ago, when the government announced a lockdown to curb the spread of the coronavirus, the SENSEX and NIFTY50 indices plunged 37% each on a monthly basis.

The selloff in the Indian equity markets began at the start of this month, which was triggered after the United States and Israel attacked Iran. Iran responded by blocking the Strait of Hormuz, a key route through which more than 20% of global crude oil is transported, and attacking US military bases and strategically important reserves in the Gulf region, leading to a spike in crude oil prices.

The war has since then escalated further and entered its fourth week, leading to a surge in crude oil prices, which have sparked fears of inflation across global economies.

The latest round of panic in global markets came after Iran threatened to attack energy and water infrastructure across the Gulf if US President Donald Trump followed on his threat to attack its electricity grid, raising fears of mass disruption in a region heavily dependent on desalination for drinking water, news agency Reuters reported.

Trump set a Monday deadline, warning late on Saturday that the US would strike Iran’s power plants unless Tehran fully reopened ‌the Strait of Hormuz within 48 hours.

Last week, Iran accused Israel of targeting facilities linked to the massive South Pars gas field, one of the largest natural gas reserves in the world. In response, Iran reportedly launched missile attacks on energy infrastructure in Qatar and Saudi Arabia, intensifying fears of a wider regional conflict.

“Turbulence in West Asia over the ongoing war involving the US, Israel and Iran will continue to deter investors, who have already seen massive wealth erosion in their equity investments," said Sachin Neema, Co-Founder, Garud Investment Managers.

"While global market cues will continue to determine the trend in local shares, any heightened conflict would spark a major correction, with surging international oil prices already denting the overall business prospects of several businesses. To make matters worse, heavy FII selling over the past few weeks is making domestic investors wary of taking any meaningful exposure in local equities,” Neema added.

Market crash in 2008 on global financial crisis

The benchmarks witnessed one of their worst crashes in October 2008 when the SENSEX and NIFTY50 indices plunged over 50% amid the global financial crisis after the global investment bank Lehman Brothers collapsed owing to the subprime mortgage crisis in the United States.

The SENSEX dropped over 60% from its peak of 21,000 in January 2008 to sub-8,000 levels by October owing to massive selling by the foreign institutional investors.

However, the benchmarks recouped their entire losses in 2009 and touched record highs in 2010 after governments and central banks across the world rolled out massive stimulus measures to stabilise the financial system and revive growth.

Central banks resorted to easy monetary policy, with the Federal Reserve cutting rates to 0%-0.25%. The government in the US also launched its Troubled Asset Reconstruction Programme (TARP), under which the government infused up to $700 billion into the banking system.

In India, the Reserve Bank of India announced rate cuts and liquidity infusion while the government resorted to tax cuts and increased public spending, thereby restoring investor confidence.

COVID-19 crash of 2020

Another major rout in stock markets happened in March 2020 when the government announced a lockdown across the country to curb the spread of the coronavirus pandemic. The benchmark NIFTY50 index dropped 23.25% in March alone as fears of lockdown fuelled worries of recession in the world economy.

The NIFTY50 index plunged to a low of 7,610.25 on March 23, 2020, falling a whopping 38% from its December 2019 high of 12,293.90.

After the sharp disruption caused by COVID-19, the gradual reopening of the economy acted as the first trigger for recovery.

As lockdowns eased and mobility returned, consumption demand rebounded across sectors—from automobiles and real estate to discretionary spending. Businesses that had faced unprecedented shutdowns began reporting improved earnings visibility, which in turn restored investor confidence.

The NIFTY50 index jumped over three times to hit a record high of 26,277 in September 2024.

The recovery in the market was supported by aggressive policy responses from the government. The government announced including production-linked incentive (PLI) schemes, higher infrastructure spending and relief packages for MSMEs, which helped revive industrial activity and strengthen long-term growth prospects.

The Reserve Bank of India also came in to support the economy as it slashed interest rates to historic lows and infused significant liquidity into the financial system.

Lower borrowing costs encouraged both corporate investment and retail participation, while abundant liquidity found its way into financial markets, particularly equity markets. This easy-money environment created ideal conditions for a sustained market rally, analysts noted.

A surge in retail participation added fuel to the rally as low interest rates and reduced returns from traditional savings like fixed deposit instruments and increased digital access to trading platforms led to a new wave of individual investors entering the stock market.

Revival in corporate earnings further reinforced the upward trajectory.