why do the sensex crash?

Why am I writing on this topic?

Well, I was just trying to help my friend with his innocent query as to how the stock markets work and why does the word Sensex crashing by X or Y points is being repeated whenever the market losses some good number of points int he recent past.
Well when you open up the economy (like India has) there are many good things but the open economy tag comes with some disclaimers also and these events form part of the latter.

What is a sensex?
It is nothing byt Sensitive Index and forms the heart of the eprformance of an economy as it takes into account 24 sectors in an economy(roughly covering everything in an Indian economy).So you normally have players like Reliance, Infosys,Tata, Birla(or their group firms), leading players in each industry being part of this sensex. Sensex in its true meaning is the pulse of Indian economy and those are the reasons precisely why we have so much close attention being paid to it day in and day out.

why do the sensex crash?
Yes we have a long and chequered history of our stock markets crashing and sometime for the dumbest of the reasons. Anyways for me these are the resons for the ensex to ahve crashed -
1. People are pessimistic about stock markets. The reason - Economy may be going through a recession and nothing is going right in the economy.Hence the bearish sentiment
2. Insider Trading incidents - people are very smart or rather greedy and do not want to miss an opportunity to make quick cash. There have been lots of incidents involving people being tipped about company information which is supposed to be very critical in nature. Say for example - A Company has acquired B company and this according to the amrket regulator should be strictly confidential but the parties involved in the deal/negotiations may be tempted to go ahead and buy the shares of the A company or the B company knowing/anticipating very well how the market willt ake this news byte.This is nothing different than rigging the system.
3. Political/economic reasons (I famously call it SLEPT - Social,Legal,Economic, Political,Technological reasons)- The markets also move a great deal based ont he future forecasts of the country. Examplle - the strained relations between India and Pakistan are always a factor in the day to day operations of the Sensex. If today some Political unrest happens in india the markets will nosedive getiing into a very negative sentiment.In the same manner the economic,technological factors impact the market.
4.Global events - Today we often come across comments liek "The world is one small place" etc. Yes events happening around the world also become important factors inthe behaviour of the stock market.This has far more implications today than ever before as India is an open economy with a lot of investments/stakes from firms around the world. Hence when the 9/11 incident happened in US the markets world over including in india went southbound as USA is the most powerfull nation int he world and the largest economy in the world.
5. Negative media bytes/events from one of the sensex heavyweights companies - The markets can also go on a rally with negative sound bytes.The analysts can hear some rumours and start taking positions accordingly. I think Enron was one such incident where it could rally huge valuations through shrewd media publications and thus over a period of time jacking up its price.And when it all got bared the markets fell like a pack of cards.
6.Due to tough regulations which are or may not be well accepted by the market from
the Regulator(SEBI)-
7.The Union Budget/Govt. Policies
8.The confidence of the foriegn investors in India (If the FII or the foriegn investment takes a sudden/rapid beating).