The stock market is filled with individuals who know the price of everything, but the value of nothing. - By Phillip Fisher.

Abstract
A financial or economical crisis is a situation in which the value of a financial institution or asset drops frequently and it is often associated with a rapidly on the foreign banks, in which investors value of assets decreases or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution. Several investment policies are made after making a decision about stock exchange efficiency when stock markets were affected by financial crisis shocks.

This article is on the stock exchange which are few, particularly in the aptitude of stock markets crashes in India. This article adds to the literature on market efficiency by studying the impact of previous financial crisis on stock exchange, impacts of stock market crash due to pandemic and COVID-19 and efficiency in emerging stock markets such as India.

Introduction
A Stock Market crash is a surprising fall in the costs of stock value which spread over a significant part of a market bringing about loss of financial backers' riches. They are the aftereffect of the alarm in the brain of financial backers just as monetary elements. Securities exchange crashes regularly are joined by the financial downturn, theories, high joblessness which prompts the monetary emergency.

Indian stock exchange are the one of the oldest stock market or Exchange in Asia. It goes back to the 18th century when the British Raj (East India Company) used to circulate loan securities. The information or data was collected from two stock exchange i.e. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) in India. "The stock market is a volatile place. Hence, there have been times when markets have crashed and caused losses to stock investors within no time.

A crash is usually defined as a rapid double-digit fall in indices. While the markets have always recovered sometimes, the impact of a crash has lasted for years."[2] "These reforms were taken out with the aim of improving market's condition by enhancing transparency, efficiency, preventing unfair trade practices and bring the Indian stock market up to international standards." In the Indian stock market past history, there has been a few market crashes in India affecting the shareholders or stockbrokers financially.

At the point where the stock exchange explodes, it affects a market of bear, during which the financial investors sells their stocks and there is a 20% or higher decrease in the stock exchange with no improvement. Critical fall in stock price can prompt bankruptcy and recession as the development of companies falls. They stops producing enough incomes and revenues, resulting in employees cutbacks. Financial Investors does endure loses if the stock market condition doesn't improve rapidly.

After a stock market crash, the very first thing which a investor can do is:

• Keep a track on their stocks
• Analyze which shares have been affected the most because of crash
• Recheck if the investor's portfolio includes more high-risk stocks or safe ones.

Great recession on stock exchange can result to a bear market. This occurs when the market falls 10% beyond the neutral level, resulting in a total loss of 20% or more. A recession can also be triggered by a stock market crash. If the market crash, corporations have less ability to grow in the economy. Companies or firms that don't produce enough will have to lay off some workers or employees in order to stay solvent. As the market continuous to fall, the economy decreases which results in creating a recession in stock market.

Various Stock Market Crashes in India

In 1992, Harshad mehta was a stockbroker in Bombay who was responsible for the Indian stock market crash in 1992 by stock off around Rs 1,000 crore from the financial system in order to buy equities from the Bombay Stock Exchange (BSE). He was also named as the stock market's Big Bull, and all present original investors followed in his path and continued to buy equities.

He managed to fluctuate the Sensex by about 275 percent in a year, and markets surged from 1000 points to 4000 points. His scheme came to light when the State Bank of India founded a shortage in government securities. Harshad Mehta was found to have manipulated the stock market system out of approximately Rs 3,500 crores, according to the probe. The markets fell by 72 percent on August 6, 1992, after the scam was discovered, resulting in one of the largest drops in the Indian stock market ever.

During the 2004 crash of stock market, the Bombay Stock Exchange (BSE) falls by 842 points. The Securities and Exchange Board of India (SEBI) looked into the matter and finds that the crash was caused by UBS placing a significant number of selling orders for anonymous clients. UBS was a well-known foreign institutional investor. On 17th May 2004, SEBI took action against UBS a foreign institutional investor.

UBS was one of the top sellers of shares in May 2004. UBS executed large-scale sell orders on behalf of anonymous clients, many of whom SEBI believes are Indians. These clients used UBS to trade Indian stock market, but they hid behind a web of investment arrangements that was connected from India to Mauritius, London, the British Virgin Islands, the United States of America and back to India. SEBI founds the names of the eventual beneficiaries of the UBS transactions on May 17, as well as assurances that they were not Indians, during the year-long probe. UBS refused to respond to SEBI, stating clients confidentiality as an excuse.

In 2008, the Great Recession on stock exchange shock the world, the affects of which shows as a decrease of 1408 points in Bombay Stock Exchange (BSE). It effected the investors or brokers unconditionally and resulted in a losses of their wealth. SENSEX of BSE showed a fall of 875 points on 22nd Jan 2008 and another 834 points on 11th Feb 2008. On 24th Oct 2008, SENSEX fall by 1,070 points again in the economy. It was the 2nd largest within one day SENSEX crash. The worst fall in stock prices where experienced by Mahindra & Mahindra, Hindalco Industries, Tata motors, DLF and Reliance industries.

In 2015-2016, the beginning of the year on 6th January, SENSEX falls with an 854-point. But it was only the start, as the SENSEX dropped 1,624 points on August 24, 2015. At the same time, the National Stock Exchange (NSE) dropped by over 490 points. Experts believe the fall was caused by rushed stock market selling in India and China following a decline in the latter's markets.

As the crashes proceeded, the Bombay Stock Exchange (BSE) witnessed four consecutive drops of over 1600 points by February 2016. It happened as a result of an increase in Non-Performing Assets (NPAs) in India's banking finance, as well as other global events. The country's stock market crashed again in November 2016 as a result of demonetization declared by the Prime Minister. On the other hand, many internal matter of the country also affected the stock market like Surgical strike over Pakistan, Passing of GST bill and majorly demonetization.

In 2020 due to the pandemic across the world, every stock market was taken down by recession. But in Indian Stock Market, it would be entirely wrong to just blame covid-19 as the alone reason. There are many factors which led to the 2020 crash. On 28th February, World Health Organization (WHO) announced coronavirus by which SENSEX falls to 1448 points and NIFTY fell by 432 points. Then the next fall of the stock markets was after RBI took over the YES Bank for reconstruction it was happened due to rising NPA's.

Legislative Regulations Governing the Stock Exchange

1. The Securities Contracts Act (Regulation), 1956
   The Securities Contracts Act (Regulation), 1956 (now called SCRA) and the Securities Contracts Act (Regulations) of 1957 are designed to regulate the sale of shares and transactions in such securities in order to prevent unfavorable assumptions. The law also focuses to monitor or regulate the selling and buying of securities without restrictions on stock exchanges or markets, through the licensing of stock brokers.
   
   The Securities Contracts Act sets out different securities situated with securities and establishes a process for the stock market to be recognized by the Central Government/SEBI, the process of listing corporate transactions and securities related to buying and selling securities on behalf of investors. It provides direct and indirect full control over all aspects of securities trading.
   
   In particular, the Central Government of India has the power to control over:
   
   • Managing and operating stock exchanges,
   • Collateral contracts or mergers, and
   • Listing of securities on stock exchanges or markets.

   The act also includes:
   Provisions for withdrawing recognition granted to stock. In terms of Section 5 of the Act, if the Central Government is of the opinion that the stock exchange undermines trade interests or public interests, the government will revoke the recognition given to the stock by giving notice and providing an opportunity to be heard in the stock market.
    

2. SEBI Act, 1992
   The Securities and Exchange Board of India is the regulatory body for securities and stock markets in India. As per defined under Section 3 of the SEBI Act, SEBI is a business entity with a continuous sequence and the same seal with the ability to hold, dispose and acquire of assets, both tangible. and immovable and contractual, and will sue and be sued on its behalf. Section 11 of the SEBI Act lists a number of functions or roles that SEBI plays in protecting, securing and regulating the securities market.
   
   Some of the tasks are:
   
   • It helps in business management in stock trading and other financial markets.
   • It helps in regulating custodians of securities, credit rating agencies and foreign portfolio investors.
   • It helps in managing and registering consultants such as brokers, sub-brokers, underwriters, bank brokers etc.
   • SEBI Act helps in prohibiting fraudulent and unethical trading practices such as price fraud, fraud etc. and regulating internal trade.

   The law of India also gives SEBI several powers or authorities related to the securities market. SEBI is empowered to make inquiries regarding investigations, issue directives and penalties if any company action damages the profits of the investors. It can pass orders such as trade suspensions, block market access, attachment of mediators' bank accounts, etc.
    

3. Companies Act, 2013
   The Companies Act, 2013, prescribes functionality in the matter, distribution and transfer of securities and corporate management features. Displays disclosure standards on public affairs related to the capital, corporate governance, listed companies and risk factors. It also helps in regulating the capital gains, use of premiums and discounts or negotiation on issues, bonus issues and rights, interest payments and dividends, the provision of annual reports and other information.
   
   Section 40 under Companies Act states as:
   Each company, making a public promise, to submit an application to one or more well-known stock exchanges for permission to process securities in a transaction.

Conclusion
This paper tells about the impacts of stock market crash on investors or companies or firms and also various stock market crash in India and reasons for the crash over the last 3 decades. Since it's impossible to foresee or predict the market crash, it is necessary to be aware of the small fluctuations or policies which may or may not affect the market.

In this paper, a fall because of scams and other human-made situations is discussed and also about crashes like, the 2008 global financial crises over the world, the affects of Demonetization announced by the Government of India back in November 2016 and COVID-19 effects. The stock market crash in 2020 is very crucial as it is the first recession condition in India. The factor for the crash was the economic lockdown over the country.

References:

1. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7995228/
2. https://www.researchgate.net/publication/227364279_The_Indian_Stock_Market_and_the_Great_Recession
3. https://assets.researchsquare.com/files/rs57471/v1_covered.pdf?c=1631839128
4. Recent-Financial-Crisis-and-Market-Efficiency-An-Empirical-Analysis-of-Indian-Stock-Market

End-Notes:

1. Available at: https://groww.in/blog/history-of-stock-market-crashes-in-india/

Written By: Harsh Bhardwaj - Final Year law student pursing BBA-LLB corporate and IPR Hons. of The Northcap University, Gurugram