Market correction is a phenomenon when the prices fall more than 10%. The word correction is used here because the market is adjusting the prices of assets or securities that were overvalued. There can be various reasons that can trigger the market correction. In the long run, the companies’ stock prices move in the same direction as earnings do. Due to the economic downturn, the companies’ earnings are affected and so do the stock prices.
Another cause of price decline is the emotional trading among the traders caused by the rumors that the stock value is too high and it is ready to fall. To get themselves out of the stocks with a good price or the fear of loss induces a lot of investors to sell the share that leads to a sharp decline in the stock market.
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