A correction is a moderate decline in the price of stocks, indices, or financial markets, typically ranging between 10% and 20% from the recent peak. Corrections are considered a normal part of market cycles and are often caused by factors like profit booking, overvaluation, interest rate hikes, or economic uncertainty.
⭐ Key Features
- Decline of 10%-20% from a recent high.
- Gradual drop over days or weeks (unlike a crash, which is sudden).
- Typically short-term and followed by a rebound.
- Can be sector-specific or market-wide (Nifty, Sensex).
- Often provides a buying opportunity for long-term investors.
⚠️ Common Causes
- Overvaluation – Stocks or indices rise too fast, prompting profit-taking.
- Interest Rate Hikes – Central banks (like RBI) raising rates can slow growth.
- Global Market Influence – U.S. Fed rate hikes, oil price changes, or trade tensions.
- Earnings Reports – Disappointing corporate earnings can trigger selling.
- Regulatory Changes – Government policy changes impacting industries.
📝 Historical Examples of Market Corrections in India
| Year | Event | Correction (%) | Duration | Cause |
| 2022 | Nifty 50 Correction | -15% (18,600 → 15,200) | 4 months | Global inflation fears, U.S. Fed rate hikes. |
| 2018 | Market-wide Correction | -12% (11,000 → 9,600) | 2 months | Global trade war concerns (U.S.-China). |
| 2021 | Post-Budget Correction | -9% (14,800 → 13,500) | 1 month | Profit booking after pre-budget rally. |
| 2016 | Demonization Impact | -11% (8,700 → 7,800) | 1.5 months | Liquidity crunch after demonetization. |