WHY DID SENSEX FALL

DOWN IN 1100 PONITS

Well lets start from early half of last year. Between June 2014 and June
2015, China's Shanghai Composite index rose by 150 percent. A big reason
for the stock market rally was that a lot of ordinary Chinese people began
investing in the stock market for the first time. More than 40 million new
stock accounts were opened between June 2014 and May 2015. Now to buy
stocks in the market you need money & unfortunately the common people
didnt have much. So what did they do? They borrowed money to buy
stocks in the market.
The major concern with China was that their stock markets were booming
but key economic indicators of China showed that the economy was slowing
down leaving many financial analyst puzzled. Think of it as a bubble which
was growing on the air of debt without any increase in the real economic
output of China. Analysts predicted that a huge stock market bubble was
taking shape. The Chinese government was becoming weary of a debtfinanced stock market and they believed that the stock market growth had
become un-sustainable.
Many analyst feared that the bubble would burst and one fine day (on June
12 to be precise) China stock markets fell like there is no tomorrow, losing
almost a third of its value. Desperate times call for desperate measure and
the Chinese Government took the following measures to assuage the
situation:

The central bank provided more cash to the China Securities Finance
Corporation, a state-run company that lends people money so they can
buy stocks.

Initial public offerings were suspended, so that newly issued shares

wouldn't compete for capital with those already on the market.

Companies' major shareholders those with more than 5 percent of

a company's shares, as well as executives and board members were
banned from selling shares for six months.

China's securities regulator ordered companies to either buy their own

shares or encourage their executives or