HISTORY OF STOCK MARKETS IN INDIA

This presentation discusses the history of stock markets in India and firstly it gives
a brief introduction to what exactly are stock markets and stock exchanges.
Further this presentation is divided into 5 major parts which are as following:
1.) BSE
2.) NSE
3.) SEBI
4.) REFORMS INTRODUCED
5.) BIGGEST DOWNFALLS IN STOCK MARKET

INTRODUCTION-
Stock market is a market where the trading of company stock (which includes –
shares, mutual funds, bonds and derivatives), both listed and unlisted securities
takes place. Stock Exchanges are an organized market place, either corporal or
mutual organization, where members of the organization gather to trade
company stocks or other securities.
There is a very minute difference between Stock Market and Stock Exchange
which is Stock exchange includes all the national stock exchanges in the country
(in India these are the NSE and the BSE).

BOMBAY STOCK EXCHANGE (BSE) –

Indian stock market marks to be one of the oldest stock market in Asia. Its start
dates back to close eighteenth century when East India Company used to transact
loan securities. In the mid-1850s, an informal group of 22 stockbrokers began
trading under a banyan tree investing just a princely amount of 1 Rupee. In 1860
this group flourished with 60 workers and soon after American Civil War the
brokers further increased to 250.
This group organized themselves as ‘The Native Share and Stockbrokers
Association’ which in 1875, under the leadership of ‘Premchand Roychand’ was
formally organized as the ‘BOMBAY STOCK EXCHANGE (BSE)’ and the name is still
prevalent today.
In 1956, the Government of India recognized the Bombay Stock Exchange as the
first stock exchange in the country under the ‘Securities Contracts (Regulation)
Acts.
Now we will discuss some of the current facts and features about the BSE –
1. Index of 30 stocks representing 12 major sectors
2. World’s number 1 exchange in terms of the number of listed companies
3. World’s 5th in transaction numbers
4. Index- BSE SENSEX which is an indicator of all major companies listed on
BSE
5. MD and CEO – Mr. Ashishkumar Chauhan
6. Number of listings- 5,749
7. Headquarters- Mumbai, Maharashtra, India
The most decisive period in the history of the BSE took place after 1992. And this
year will go down in the history of India as the year of the stock market scam.
Harshad Mehta, a BSE member used receipts of public sector banks to manipulate
stock prices. He siphoned off around 1,000 crore rupees from the banking system
to buy stocks on the BSE and manipulated around 3,500 crore rupees in the
system.

NATIONAL STOCK EXCHANGE (NSE) –

The foot-dragging by the BSE helped radicalize the position of the government,
which encouraged the creation of the National Stock Exchange (NSE) in the year
1992, which created an electronic marketplace. NSE started trading on November
4, 1994.
NSE was setup by a group of leading Indian financial institutions at the behest of
the Government of India to bring transparency to the Indian Capital Market.
Based on the recommendations laid out by the government committee, NSE has
been established with a diversified shareholding comprising domestic and global
investors.
Within less than a year, NSE turnover exceeded the BSE. BSE rapidly automated,
but never caught up with NSE spot market turnover. In this way NSE brought
about a paradigm shift in the Financial Market.
Instead of trading membership being confined to a group of brokers, NSE ensured
that anyone who was qualified, experienced and met minimum financial
requirements was allowed to trade.
Now we will discuss some of the current features and facts about the NSE-
1. Bunch of 50 stocks
2. It is a complete capital market prime mover
3. Number of listings- 1,696
4. MD & CEO - Vikram Limaye
5. Index- Nifty 50 which is an indicator of all the major companies listed on
NSE
6. Headquarters – Mumbai, Maharashtra, India

India has total of 23 Stock Exchanges and besides NSE and the BSE all are regional
ones. Now we will discuss some of the regional stock exchanges –
1. In 1894, Ahmedabad Stock Exchange was started to facilitate dealings in the
shares of the textile mills present there.
2. Calcutta stock exchange was started in 1908
3. Madras stock exchange was started in 1920
4. Pune stock exchange was setup on 2nd September 1982 to cater to the needs
of the growing investor community in the city.
5. OTC Exchange of India or Over the Counter Exchange of India was founded in
1990 and started functioning in the year 1992. OTCEI was the India’s first
exchange for small companies and was setup to access high-technology
enterprising promoters in raising finance for new product development in a
cost-effective manner.
OTCEI is no longer a functional exchange as the same has been de-recognized
by SEBI vide its order dated 31 March 2015.
 SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) –

Securities and Exchange Board of India which is often referred as SEBI is the
key regulator of securities market in India. It was established in 1988 by the
government of India and is established and incorporated through section 3 of
SEBI Act, 1992. SEBI ensures the growth and protection of issuers, investors
and intermediaries.
Reasons for the establishment and foundation of SEBI –
1. Tremendous growth in capital market.
2. Due to increased participation of public in the stock market and stock
exchanges.
3. Increase in malpractices such as rigging of prices, unofficial premium on
new issue, violation of rule etc.
The preamble of SEBI Act, 1992 states its objective as – “An act to provide for
the establishment of a board to protect the interests of investors in securities
and to promote the development of, and to regulate the securities market
and for matters connected there with or incidental to “.
FUNCTIONS AND RESPONSIBILITIES OF SEBI-
1. SEBI has three functions rolled into one body: quasi-legislative, quasi-
judicial and quasi-executive.
2. It drafts regulations in its legislative capacity, it conducts investigation and
enforcement action in its executive function and it passes rulings and
order in its judicial capacity.
3. Though this makes it very powerful, there is an appeal process to create
accountability.
4. SEBI has taken a very proactive role in streamlining disclosure
requirements to international standards.
Other objectives of SEBI-
1. Protection
2. Make merchants and brokers competitive and professional.
3. Prevention of malpractices.
4. Balancing
 5. Orderly functioning

REFORMS INTRODUCED IN IN THE INDIAN STOCK MARKET

1. Stock market liberalization is the decision by a government to allow foreign
investors to purchase shares in the local stock market and domestic
investors to purchase shares abroad.
2. As a part of the capital market reform programs, governments approved
new laws and regulations aimed at creating the proper legal and regulatory
framework for capital markets to flourish.
3. Thus, the foreigner’s Act was formed.

4. Reforms in BSE –
1. January 2000: rolling settlement system (T+5 system)
2. January 2001: BLESS was introduced
3. July 2001: badla was wholly replaced by rolling settlement
system
4. January 2002: all the shares in BSE were brought under this
scheme.
5. Introduction of margin trading in September 2001.
6. Further BLESS and badla were banned.

BIGGEST DOWNFALLS IN INDIAN STOCK MARKET –

1. The biggest scam by Harshad Mehta has been discussed earlier but besides
this a similar act took place in March 2001, in which 176-point Sensex crash
shook the nation and was instigated by Ketan Parekh and according to Mrs.
Sucheta Dalal a renowned journalist, these two acts were the biggest scams
that happened in our stock market within the span of 10 years.
2. The biggest fall of Sensex in Indian Stock market history happened on 24
August 2015 with Sensex falling 1624.512 points.
3. In the third week of January 2008, the Sensex experienced huge falls along
with other markets around the world. On 21 January 2008. The Sensex saw
its one of the highest ever loss of 1,408 points at the end of the session.
The Sensex recovered to close at 17,605.40 after it tumbled to the day’s
 low of 16,963.96, on high volatility as investors panicked following weak
global cues amid fears of a recession in the US.
4. The next day on January 22, the BSE SENSEX index went into freefall and
closed with a loss of 875 points.
5. On March 17 2008 the Sensex dropped by 951 points on the global credit
crisis and distress, to fall below the 15,000 mark closing at 14,810.