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Anatomy of a Crash: the Market Meltdown of March 2020

A story in charts
Anatomy of a Crash: the Market Meltdown of March 2020
"apocalypse in the stock markets", created with StableDiffusionXL.

In March 2020, financial markets around the world were roiled by the rapid global spread of the COVID-19 pandemic. As countries implemented lockdowns and economic activity ground to a halt, investors panicked, leading to one of the most volatile periods in market history. Let's revisit those tumultuous weeks through charts and data.

The Ides of March

The first major sign of trouble came in early March as news of COVID-19's deadly toll started trickling out. Investors began fleeing risk assets like stocks. Sample the movement of some front-line stocks.

By mid-March, the selloff had intensified dramatically. Three of the biggest single-day point drops for the BSE Sensex Index ever occurred on March 12th, 16th, and 23rd.

The market would fall from its pre-Covid levels of 41,000 to 26,000, a fall of 36%, as the pandemic's economic threat came into full focus.

The Unraveling on March 23rd

March 23rd marked the nadir of the selloff. This "Black Monday" saw the Sensex's biggest ever single-day percentage drop of over 13% as lockdowns were implemented across India. The market opened down at the lower circuit breaker, halting trading for an hour - the first time this had occurred since the 2008 financial crisis.

Stocks across sectors were bloodied, with banking names like Axis Bank, Bajaj Finance, and ICICI Bank plunging over 20%. Even stalwarts like Reliance Industries and Infosys suffered double-digit percentage losses on shocking volume.

When Fear Peaked

The severity of the selloff can also be gauged by the Volatility Index (VIX) - known as the "fear index" - which skyrocketed to levels never seen before. Typically ranging between 12-18 during normal market conditions, the VIX peaked at an astonishing 83 on March 23rd as uncertainty reigned supreme.

The VIX remained elevated above 40 for the entire month, reflecting the heightened market turbulence and investor panic around COVID's global economic impact.

Signs of Life

Remarkably, the markets didn't stay down for long. Within just a couple of weeks, stocks had mounted one of the most stunning comebacks in history, leaving even eternal optimists stunned.

By early April, the Sensex had regained over 25% from the March 23rd lows, preludes to the incredible COVID recovery rally that saw the index reach new all-time highs just over a year later.

While the events of March 2020 were unprecedented, the extreme volatility and subsequent rebound highlighted the market's resilience and the opportunities that can arise from maintaining investment discipline during even the darkest periods. The crash will go down as one of the most dramatic in financial market history.