The Indian stock market has seen many milestones since independence. On the occasion of this Independence Day, let’s decode the history of the development of the Indian stock market.
The Indian stock market has faced numerous challenges and achieved remarkable milestones since independence. On the occasion of Independence Day, let’s delve into the growth of the Indian stock market post-independence.
The stock market, a robust avenue for investments, has evolved gradually. Yet, it is not a straightforward realm.
Understanding the stock market thoroughly is crucial. Often, it is advised that investors should have confidence in their judgment while investing. This implies depending on personal research rather than external opinions. This market has created millionaires but also led to substantial losses. But have you ever wondered about the origins of India’s stock market? If you have, great; if not, we will enlighten you.
This August 15th, 2023, marks the 77th Independence Day celebration. The Indian stock market has seen a remarkable journey since independence. It has witnessed substantial expansion and undergone significant changes.
Today, it is a pivotal financial hub, attracting domestic and international investors.
But, before we understand the journey, let’s first understand the basics and learn about the two primary stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE).
Both exchanges are the platforms that facilitate the trading of stocks for investors. Interestingly, there used to be over 20 regional stock exchanges in India. However, most of these regional exchanges were closed following stringent regulations imposed by SEBI.
Wait, we all know how advanced the stock market is today. But, did you know how we reached here? Let’s dive deep into a short history class.
#1: Inception of Stock Market Trading
Stock trading in India has a historical foundation that stretches back to the 18th century—this period marked the commencement of trade in debt securities by the East India Company. However, establishing the Indian stock exchange began informally in the 1850s. During this time, 22 stockbrokers initiated trading activities beneath a banyan tree in front of Bombay’s Town Hall.
The Companies Act was introduced in 1850, which sparked investors interest in corporate securities. As the years passed, the number of stockbrokers multiplied, leading to shifts in their trading locations. Ultimately, in 1874, they established a more permanent trading venue known today as Dalal Street.
#2: Stock Market Before Independence
By 1875, an entity named ‘The Native Share and Stock Brokers Association’ was formed. In the same timeframe, on 9th July 1875, Shri Prem Chandra Rai established the Bombay Stock Exchange.
The year 1894 marked the inception of the Ahmedabad Stock Exchange. This exchange was primarily established to facilitate trading in shares of textile mills located in the city. Following this, the Calcutta Stock Exchange was established in 1908, aiming to offer a market platform for shares of plantations and jute mills. In 1920, the Madras Stock Exchange also commenced its operations.
#3: Stock Market Post Independence
Following India’s independence, the Bombay Stock Exchange (BSE) took a leading role in terms of trading volume. However, due to issues like a lack of transparency and dependable clearing and settlement systems, the entire system needed a regulator.
In the year 1957, BSE reached a significant achievement by gaining official recognition from the Government of India under the Securities Contract Regulation Act.
In 1986, the Sensex, a stock market index, was introduced. This was followed by the launch of the BSE National Index in 1989. This period also saw disruptions in the stock market. In response, the Securities and Exchange Board of India (SEBI) was established in 1988 to regulate stock exchanges. By 1992, SEBI had gained autonomy and became a fully independent authority to regulate the stock markets.
The National Stock Exchange (NSE) was established in 1992 as the first dematerialised electronic exchange to enhance market transparency. Subsequently, in 1995, the BSE transitioned from the open-floor trading system to the electronic trading system.
The year 2020 witnessed the global economic impact of the COVID-19 pandemic, which also affected the Indian stock market. The market experienced a significant decline due to lockdowns and economic challenges. However, it gradually rebounded and showed signs of recovery afterwards.
(The chart depicts the number of IPO, FPO and OFS issue count from 1989 to 2022 and the amount of money that is raised through them during that time.)
Current State of the Stock Market
In July 2023, a remarkable milestone was achieved as a record-breaking 3 million new Demat accounts were opened in India. This surge highlights the increasing involvement of individual retail investors in the stock market. Simultaneously, there are over 5,000 companies presently listed on Indian stock exchanges.
Since gaining independence, the Indian stock market has undergone remarkable transformations. It has transitioned from manual paper-based trading to efficient electronic trading systems. The journey has progressed from trading under a banyan tree to big infrastructures boasting advanced technology-based trading and investing.
Today, we have arrived at a stage where people can engage in online trading from the comfort of their homes. Services like Demat accounts are accessible with minimal brokerage charges.
Moreover, the Indian stock market ranks among the world’s largest, encompassing diverse industry sectors. Furthermore, technological advancements have brought about a revolutionary shift in how trading and investing are done.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.