HOT Stock Market crashes!

Yesterday almost all sectors were red due to sudden dramatic decline of stock prices across a significant cross section of the stock market. Crashes are driven by panic as much as by underlying economic factors. As U.S. market crashed on Monday, the fear wave made the Asian market slip from the edge of the asphalt salt.

A prolonged period of rising stock prices and economic panglossianism, a market where P/E ratios (P/E = Stock Price / Earnings per share) exceed long term averages, and extensive use of margin debt and leverage by market participants.

For local share investors, financial horror has firmly set in as their wealth washes away. For retirees, their savings are shrinking as superannuation funds post huge losses. And the future is not bright in the world's biggest economy. While US markets were closed overnight for a holiday, US stock index futures were down sharply, suggesting investors were preparing to flee the US stock market when the market reopened.

As the shock wave shook the world with total loss of 20 * 10^12 rupees (20 lakh crore).

The local stock market collapse is the longest losing streak since January 1982 and yesterday was the All Ordinaries' worst day since this year’s fall began - wiping out all the huge gains of 2007.