What is Share Market? What is the history of the Indian Share Market?
A stock exchange is “a body of individuals, whether incorporated or not, constituted for the purpose of regulating or controlling the business of buying, selling or dealing in securities.”
“Securities refers to shares, bonds, scrip, stocks, debentures stock, and other marketable securities of incorporated companies or similar, government securities, and rights or interest in securities.”
In India, the share market is a term used to refer to the two major stock exchanges in the country— Bombay Stock Exchange (BSE), and the National Stock Exchange of India (NSE). There are also 22 regional stock exchanges.
History of Indian Share Market
The Indian stock market traces its history back to the late 18th century when the trading floor was under the shade of a sprawling banyan tree opposite the Town Hall in Mumbai. A few people would meet under this tree to informally trade in cotton. This was mainly due to the fact that Mumbai was a busy trading port and essential commodities were traded here often.
The Companies Act was introduced in 1850 following which investors started showing an interest in corporate securities. The concept of limited liability also put in an appearance around this time.
By 1875, an organization known as ‘The Native Share and Stock Broker’s Association’ came into being. This was the predecessor of the BSE .
In 1894, the Ahmedabad Stock Exchange came into being primarily with the objective of enabling dealing in the shares of textile mills in the city.
The Calcutta Stock Exchange was formed in 1908 with the intention of facilitating a market for shares of plantations and jute mills
It was in 1920 that the Madras Stock Exchange took shape.
In 1957, the BSE was the first stock exchange to be recognized by the Government of India under the Securities Contracts Regulation Act.
The SENSEX was launched in 1986 followed by the BSE National Index in 1989.
The Securities and Exchange Board of India (SEBI) was constituted in 1988 to monitor and regulate the securities industry and stock exchanges. In 1992 it became an autonomous body with completely independent powers.
In 1992, the NSE was formed as the first demutualised electronic exchange in the country with the intention of ensuring transparency in the markets.
NSE began operations in the Wholesale Debt Market (WDM) segment in 1994, the equities segment in 1994, and the derivatives segment in 2000.
It was in 1995 that the BSE made the switch to an electronic system of trading from the open-floor system.
In 2015, SEBI was merged with the Forward Markets Commission (FMC) with the aim of strengthening regulation of the commodities market, facilitating domestic and foreign institutional participation, and launch of new products.
Current Day state of affairs:
Today, the BSE is measured as the world’s 11th largest stock exchange and the market capitalization is likely to be around $1.7 trillion. The market capitalization of the NSE is estimated to be over $1.65 trillion.
Over 5,000 companies are listed on the BSE and 1,500 figure on the NSE. In terms of share trading volumes, still, both the exchanges are on parity. Nowadays people are able to conduct online trading sitting in the comfort of their home. Facilities such as zero brokerage demat and live updates are all available with the help of internet.