History of Indian Stock Market

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Tutorial 1: History of Indian Stock Exchange

Indian Stock Market is one of the oldest Stock Market in Asia. East India Company used to transact Loan Securities by the end of 18th Century. In the 1830s, trading on corporate stocks and shares in Bank and Cotton presses took place in Bombay.

 

Establishment of BSE (Bombay Stock Exchange)

 bse

Few informal groups of Stock Brokers organized themselves in 1875 and were formally organized as Bombay Stock Exchange (BSE). In 1956, the Government of India recognized the Bombay Stock Exchange as the first Stock Exchange in the country under the Securities Contracts (Regulation) Act.

But still there was no means to measure the overall performance of the exchange. So, in 1986, Bombay Stock Exchange developed BSE Sensex (Sensex = Sensitive Index), an index of top 30 companies, which gave a means to measure the overall performance of the Exchange.

 

Establishment of SEBI (Securities and Exchange Board of India)

 SEBI

Until late 1980s, BSE ran with low transparency and an unreliable clearing and settlement systems. Towards the end of the 1980s, new economic forces, the economic growth and currency crisis emphasized the need for modernization of the financial system. Government created the Securities and Exchange Board of India (SEBI) in 1988.

 

 

Establishment of NSE (National Stock Exchange)

 NSE

In April 1992, Bombay Stock Exchange crashed due to Harshad Mehta Scam. Finance minister Mr. Manmohan Singh urged the need of other Stock Exchange in competition to BSE. He tapped the Industrial Development Bank (IDB) to take the lead of the project of creating competition for BSE.

In November 1992, NSE (National Stock Exchange) was established as the first electronically traded Stock Exchange in India. After a few years of operations, the NSE has become the largest stock exchange in India.

BSE also automated the systems in 1995 but it never caught up with NSE Spot Market turnover.

Three segments of the NSE trading platform were established one after another. The Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options segment began operating in 2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world.

In 1996, the National Stock Exchange of India launched S&P CNX Nifty. CNX Nifty (Nifty = National Fifty) is a diversified index of 50 stocks from 25 different economy sectors.

In 1998, the National Stock Exchange of India launched its web-site and was the first exchange in India that started trading stock on the Internet in 2000.  Today, NSE has roughly 66% of equity spot turnover and roughly 100% of equity derivatives turnover.

5 thoughts on “History of Indian Stock Market

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  3. nagansth

    History of Indian Stock Exchange:

    The Bombay Stock Exchange (BSE) is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers would gather under banyan trees in front of Mumbai’s Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as ‘The Native Share & Stock Brokers Association’. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act.

    The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading Sensex futures contracts. The development of Sensex options along with equity derivatives followed in 2001 and 2002, expanding the BSE’s trading platform.

    Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition.

    Capital market reforms in India and the launch of the Securities and Exchange Board of India (SEBI) accelerated the integration of the second Indian stock exchange called the National Stock Exchange (NSE) in 1992. After a few years of operations, the NSE has become the largest stock exchange in India.

    Three segments of the NSE trading platform were established one after another. The Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options segment began operating in 2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world.

    In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50 stocks from 25 different economy sectors. The Indices are owned and managed by India Index Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard & Poor’s.

    In 1998, the National Stock Exchange of India launched its web-site and was the first exchange in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership in the Indian financial market by gaining many awards such as ‘Best IT Usage Award’ by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine (1999).

    Visit EP Knowledge Center to gain full knowledge about basics of Stock Market and Technical Analysis.

    Reply
  4. Naganath Narhari Kale

    Naganath Narhari Kale ph.No9604208422 ask for more information

    Bombay Stock Exchange (BSE)

    History of the Bombay Stock Exchange :

    The Bombay Stock Exchange is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers would gather under banyan trees in front of Mumbai’s Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as ‘The Native Share & Stock Brokers Association’. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act.
    The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading Sensex futures contracts. The development of Sensex options along with equity derivatives followed in 2001 and 2002, expanding the BSE’s trading platform.

    Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition.

    Reply

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