A Brief History Of Stock Markets In India

The stock markets work as pillars for the native and global economies of the world. From the New York Stock Exchange to India’s National Stock Exchange, saying that every stock market works inter-connectively with each other will not be false. 

India has a great historic past. It has seen a lot of ups and downs in its evolutionary journey. The stock markets of India have also witnessed a wide array of challenges. Although the intricacies were always there in the stock market, still the exchanges have found their way right to the place where they are today. 

Knowing about the history of stock exchanges in India is a lot of fun, adventure, and knowledge.

Timelines & Major Events

We have divided the timelines as per the events that had taken place in the history of the stock markets of India. 

Let us start with the year 1865 in which India had experienced its first-ever market crash, that too, before the establishment of the Bombay Stock Exchange(we’ll learn more about BSE in subsequent points). The trading activities, at that time, happened on at the corner of Meadows Street and Rampart Row by some Gujaratis and Parsis. 

In 1861, the demand for cotton had increased after the American Civil War took place. At that time, cotton was the major export commodity for companies in India. This sudden increase in production and export of cotton had put the stocks of cotton manufacturing companies at a sky-rocketed speed. People also started taking interest in cotton industries and had invested a huge sum of money into the stocks. Obviously, they had made huge returns on their investments. Though at the beginning of 1865, the Civil War ended resulting in a sharp decline in demand for cotton. This scarcity of demand had caused a stock market crash in India. 

Later on, in 1874, many market participants transferred themselves to Dalal Street(a street in downtown Mumbai, pilgrimage for every financial activity, the hub of many financial institutions). Just after one year, in 1875, India got its first recognized stock exchange -the Bombay Stock Exchange(BSE).

The Bombay Stock Exchange (BSE)  

As stated earlier, the Bombay stock exchange of India (BSE) established its existence as a ‘native share and stockbroker association’ in the year 1875. It is the oldest stock exchange in Asia. It is even older than the Tokyo stock exchange established in 1878. After its establishment, BSE has evolved itself with time. On 31st August 1957, BSE India obtained permanent recognition from the Government of India under the Securities Contracts(Regulation) Act, 1956. 

Bombay stock exchange has been providing a transparent and systematic marketplace to all people who want to trade or invest. It is also taking significant initiatives in providing knowledge to novice traders through its ‘investor education programs. 

History of Stock Market and Major Milestones of Bombay stock exchange

From 1875 till now, BSE has achieved a plethora of milestones and recognition. Some of its achievements are as mentioned below: 

• 10th July 1957: Investors’ protection fund (IPF) came into force. 
• 2nd Jan 1986: S&P BSE SENSEX; India’s first equity index launched in the capital market. 
• 3rd Jan 1989: The inauguration process for BSE Trading Institute (BTI) took place. 
• 30th March 1992: BSE hit its first 4000 point’s milestone. 
• 14th March 1995: BSE On-line Trading (BOLT) launched in India. This further expanded nationwide in the year 1997.
• 12th May 1997:  Trade Guarantee Fund (TGF) introduced in the market.
• 22nd March 1999: Central Depository Services Ltd. (CDSL) set up with other financial institutions.
• 1st Jan 2001: BSE launched index options. 
• 1st Nov 2001:  stock futures started trading. 
• 29th Nov 2001: 100% book building had started. 
• 7th Feb 2006: S&P BSE SENSEX touched its first 10000 points. 
• 24th Aug 2009: S&P IPO Index launched by BSE India. 
• 9th July 2014: BSE witnessed its 140th foundation day. 
• 3rd Feb 2017: BSE became 1st Listed Stock Exchange of India. 
• 7th June 2021: BSE touched the record milestone of 7 crores registered users online.

The National Stock Market (NSE)

Although BSE was doing well in stock trading and has established itself as the primary stock market in India, the transparency and digitalization of facts and information were some of its drawbacks. 

In 1992, the Harshad Mehta scam happened. This incident shocked the entire stock market not just in India but also outside. By that time, we started assuming the need of having a completely transparent trading platform that can run online and can show the essential facts and information as it is to the investors and traders. 

In 1992, the National stock exchange of India came into force to bring transparency in dealing in Indian stock markets. It acquired permanent recognition by the security exchange board of India (SEBI) in 1993 and started its operations in 1994. The National Stock Exchange of India covers 364 cities and towns and provides an on-screen fully automatic trading system to market participants. 

Objectives: The National Stock Exchange Of India 

• Meeting the current international standards of security markets. 
• Establishin a transparent and digitized trading system for equity markets in India.
• Providing equal access to all investors and traders in India.
• Enabling a shorter settlement cycle and book-entry settlement system, and
• Setting up a nationwide trading facility for equities, debts, instruments, and hybrids. 

NSE India: History and Major Milestones of stock market

NSE has seen a plethora of ups and downs since the time it came into force. Some of NSE’s noticed achievements are as below:

• 1995-96: NSE launched its Index named NIFTY 50 that commenced trading and settlement in dematerialized securities. 
• 1997-1998: It established NSE Indices Ltd. (previously known as India Index Services & Products Ltd) as a subsidiary to run a joint venture with CRISIL Ltd to operate joint ventures in indices business online. 
• 2000-2001: NSE launched the NIFTY 50 index known as S&P CNX NIFTY for trading securities. 
• 2001-2002: ETS listings launched on NSE. 
• 2005-2006: NSE established NSE Infotech Ltd, a wholly acquired subsidiary for  IT research and development. 
• 2008-2009: NSE launched Mutual Fund Service System (MFSS). 
• 2010-2011: NSE commenced trading in global indices such as S&P 500 and Dow Jones Industrial Average. 
• 2014-2015: CNX NIFTY had renamed as NIFTY 50. 
• 2016-2017: it promoted NSE IFSC, India’s first International Stock Exchange in India at GIFT city Gandhinagar, Gujarat. 
• It has been growing and achieving new milestones every year, you can check the complete list of achievements here.

Current Stock market Landscape In India

Currently, there are only two stock exchanges in India; the Bombay Stock Exchange and the National Stock Exchange. But they are not the only ones. After the independence of India, 23 stock exchanges had added to the list of stock markets in India, but only 7 of them are still active. The rest of them have either been exited or dysfunctional by the SEBI. We have already learned about BSE and NSE. Now, the remaining 5 stock exchanges are mentioned in the next heading. 

Other Active Stock Markets In India

Calcutta Stock Exchange (CSE)

Calcutta Stock Exchange (CSE) was incorporated in 1908. By its name, it might sound like it is Calcutta’s(then) specific stock exchange but it is operating outside of Kolkata(now), West Bengal. As per SEBI, Calcutta Stock Exchange is now a permanently recognized stock exchange in India. 

India International Exchange (India INX)

India International Exchange (India INX) was incorporated in 2017. With its establishment, India got its first International stock exchange. It manages its operations out of Gujarat International Finance Tec-City, which is a subsidiary of BSE India. It has proposed to offer stocks from Australia, Canada, the US, Japan, the UK, and Europe.  

Metropolitan Stock Exchange (MSE)

Metropolitan Stock Exchange (MSE) was incorporated in 2008. It is the modern clearinghouse formed to perform the settlement of contracts involving multiple asset classes. This stock exchange is operating out of Mumbai, Maharashtra. 

NSE IFSC LTD. (NSE International Exchange) 

It was established in 2016 as a subsidiary of the National Stock Exchange of India (NSE). It functions out of Gujarat International Finance Tec-City. 

Key Takeaways From This Chapter

• In 1865, India had experienced its first-ever market crash.
• In 1875, India got its first recognized stock exchange -the Bombay Stock Exchange(BSE).
• BSE is the oldest stock exchange in Asia.
• On 31st August 1957, BSE India obtained permanent recognition from the Government.
• In 1992, the Harshad Mehta scam happened. 
• In 1992, the National stock exchange of India was incorporated.
• The National Stock Exchange of India covers 364 cities and towns.
• There are seven active stock exchanges in India. 
• Want to know more about India’s first social media for Investors? Read

Frequently Asked Questions about stock market

What is NSE?

The National Stock Exchange of India (NSE) is India’s largest stock market. It was incorporated in 1992, the NSE has formed into a sophisticated, digital market, which ranked fourth in the world by equity trading volume.

What is BSE? 

The Bombay Stock Exchange (BSE) is the first and biggest stock market in India. It was originated in 1875 as the Native Share and Stock Brokers’ Association (NSSBA). The BSE has aided in the growth of India’s stock markets, including the Indian retail debt market, and has served the corporate division of India.

Why does India have two stock markets? 

BSE was the first stock market in India. It has been serving as the largest capital market of India since 1875. Due to the 1992 stock market scam, India felt the need of having a more digitalized and transparent stock marketplace. So, the National Stock Exchange of India was established in 1992 to maintain transparency and fair and square dealing amongst all types of investors within the market.

Why do stocks trade at different prices on different exchanges?

Double listing helps a company to gain access to capital and develops its shares more liquid. The price of the stock of a dual-indexed company on two distinct stock markets should be similar after calculating the exchange rate.