Buckle Up! We are hurtling towards a global stock market crash.

The title is self explanatory. We are headed towards a crash of biblical proportions. I do not mean to be a harbinger of bad news or a prophet of doom. It is the circumstance which compels me to articulate on the subject. Let me enumerate why I claim that we will shortly face financial rupture. 1. The AI Bubble: Bubbles are a hallmark of financial crises historically. For example, the internet bubble which accompanied the Dot Com boom and bust was finally pricked in March 2000 when fundamentals met reality. The market participants correctly assumed that Internet would revolutionize society but they got two things very wrong. a. The Timeline: The participants assumed that internet adoption would take place rapidly but in reality the pace was much more gradual. Once the true timeline became apparent, the markets had to quickly readjust profit and revenue assumptions. Since the stocks were heavily overvalued, tech stocks could not bear the shock of readjustment and NASDAQ quickly fell from the highs. b. The winner takes all effect: The markets assumed that the internet would reward companies in a proportionate manner as seen in other industries. Dozens of large companies existed in any segment in finance, manufacturing, consumption etc but internet sector had an inherent winner takes all effect which meant that only a handful of companies would benefit in a disproportionate manner. Only one or two players would go on to make meaningful returns in any segment (Like Amazon and E-Bay in E-Commerce) while the others perished quickly. This meant that most dot com stocks were doomed to failure. Similarly, markets are implying an unrealistic future when it comes to AI stocks. Just like Dot-Com, AI has become a buzzword to generate investor interest. AI may eventually have an extra-ordinary role in the future but the timeline of adoption will be much more gradual than what market is assuming. The investment boom in data-centers and GPUs which is fuelling the AI mania is based on hype rather than merit. Once markets face the truth that the unit economics do not make sense to merit such exaggerated valuations and astronomical investments, the house of cards will come crashing down. 2. The US China Trade war: Enough and more has been written and said about the Trump tariff tantrums. Both USA and China have demonstrated that they are at loggerheads with each other on the economic front. I do not wish to elucidate on the intricacies of the trade war as it has been well documented. Yet, equity stock markets across the globe have chosen to ignore the dangers and consequences emanating from the ongoing trade war. Markets assume that Trump Always Chicken Out (The TACO meme) once financial market corrects and this has lulled the participants into a false sense of complacency. In reality, markets have become completely disconnected from underlying fundamentals. The main reason for this disconnect is the abundance of liquidity. Central Banking actions post Covid have flushed financial institutions with excessive liquidity which has led to ballooning of asset prices. Asset managers and financial institutions across the globe are forced to invest in speculative assets even in the face of danger. The excessive returns have in turn pulled in the retail investor who does not want to be left out due to FOMO. This dangerous combination has led to asset prices being bid up continuously. The smallest of corrections are bought and this has disrupted the natural waves of asset price cycles. Gravity will eventually overcome these market distortions. Once the excessive liquidity dries up, it is just a matter of time for the equity markets to get upended. Markets are underestimating further escalation of tariff measures. USA is currently planning to place an additional 100% Tariff on China by November 1. If this measure is not rolled back, China too will place retaliatory Tariffs. The repercussions of these actions will be severe and it will lead to a severe global supply chain shock. So far, both countries have averted drastic steps but there is no guarantee that the November 1 deadline will be rolled back. Markets are facing an imminent crisis yet the indices are at an all time high willfully ignoring what is in front of us. The trade war can be the trigger for an apocalyptic crash. In such a scenario, panic will set in and stock prices will meltdown faster than an ice cream cone in the Sahara desert. 3. Japan debt crisis: Japan is trying to solve its debt crisis by taking on even more debt. Once the excess liquidity is exhausted, there will be a moment of reckoning. With a debt to GDP estimated to be around 235%, Japan is hooked to debt. The debt market is dependent on its central bank to print more money and keep on providing for its debt requirement. Recently, we have seen a paradigm shift in Japanese monetary policy. The Bank of Japan cannot keep buying government issued bonds as it already owns more than half of the Government bond market. The central bank is slowly moving away from its ultra loose monetary policy and moving towards quantitative tightening. This paradigm shift will unravel the true contours of the mess that reckless borrowing has inflicted in Japan. The Former Prime Minister of Japan, Shigeru Ishiba himself admitted in May 2025 that the financial situation of Japan is worse than that of Greece in 2009. In simple terms, it means that Japan is on the verge of bankruptcy. Excess liquidity has sugarcoated this reality but there is no denying the truth. Greece had to undergo deep financial restructuring and severe austerity to overcome its debt woes. Japan may have to undertake a similar exercise but it will be an extremely painful endeavor with global repercussions. 4. The Middle East crisis: The confrontation between Israel and other Middle Eastern countries has reached a boiling point. A major flashpoint in Middle East is the conflict between Israel and Iran. For the sake of its survival, Israel is ready to take drastic steps to maintain peace and stability. The drastic steps could involve sponsoring a regime change in Iran to thwart Iran’s nuclear ambitions. Any major escalation between these countries could mean the closure of the Strait of Hormuz which would mean the choking of the oil supply chain disrupting about 20% of global oil consumption. The resultant supply side shock would mean that crude oil price which is around 60 dollars per barrel goes into the triple digits. We saw a similar shock in the 1970s which led to global duress. The economic disharmony caused by spiking oil prices was one of the contributing factors towards Indira Gandhi declaring emergency in 1975. As India is a major importer of crude oil, any supply chain shock will create a huge reversal in Indian stock markets. This is not a speculative theory. The 12 day war in June between Israel and Iran could be a sign of things to come. What all of this portends for India: While nothing can be said with utmost certainty in financial markets, there is enough circumstantial evidence to suggest that we are currently in a bubble with overstretched valuations. Like all bubbles, this bubble too is waiting for a pin to prick it. The trigger for the crash can be any one of the reasons that I have mentioned above. There is a high probability that we have reached an inflection point where things will take a turn for the worse. Even gold price spiraling upwards is a warning signal that all is not well. The risk factor to my view is that the bubble can keep on bubbling higher but then it only means that the higher we go up the more we fall down eventually. India cannot escape the global repercussions of the crash. The global liquidity that has propped up asset prices all over the world has done the same for Indian stock markets as well. Hence, Indian stocks too will suffer when the bubble pops. Nifty is currently at around 25,600 as on 16th October 2025. My target for Nifty is 13,000 by December 2026. This is just my point of view. This is not financial advice. Please do your own due diligence. I reserve the right to be wrong. Author: Smiran Bhandari Note: This content is not AI generated.