Do you know stock markets are one of the essential parts of the world’s economy? The stock market contributes around 50% of GDP for most of the countries. As per the World Bank’s Report, published in 2015, the annual capitalization of the stock market was 55.2% of countries GDP.
India is also one of the countries that get significant contributions from its share market. Therefore, it is becoming one of the fastest-growing economies in the world. Most experts say this was not the same from the years; however, it is taking shape from the last few years. Therefore, it becomes crucial to dig deeper into India’s history of the share market to understand how it started and has become one of the significant stock markets.
How Does Stock Trading Started in India?
In India, the companies’ share started trading in the 1830s in Bombay, the bank and cotton presses took place. The first informal stock trading started in the mid of 1850; here, 22 brokers used to gather under a banyan tree. They used to gather near the Town Hall of Bombay for the trading purpose of making a profit. After some time, it started taking shape and moved its venue to Meadows Street Junction.
The broker and trader kept moving their venue until they got many traders in Bombay and recognized it as Dalal Street. A few years later, the brokers, traders, and companies organized their association and formed a formal platform called Bombay Stock Exchange in 1875. It is the oldest stock exchange in all of Asia, which boosted trading in various countries.
Modern History of Stock Exchanges
The modern history of the Indian stock exchange starts in 1990 because from here; it started taking its actual shape. Nowadays, the most luxurious trading happens using mobile phones to buy and sell securities. Still, it is also essential to know how it started. Earlier it was not as easy as today and not as sophisticated as today as well. To fill this gap, the NSE or National Stock Exchange came into existence where commodities used to be sold and bought using hand signals.
The broker used to have color-coded pink or blue to indicate their presence. After some time the all sauda-pads accumulated from the brokers and gave them a BHAV COPY. Brokers used to be significantly professional and influential too. They could have a lot of power. These influential brokers used to get important information about the company from their relatives who used to work there. It is how the stock exchange used to happen in its earlier stages.
Impact of Technology in Share Market
The amount of manipulation started increasing in the stock market. As a result, the ring trade system transformed with the more transparent method. As per the time, the stock market kept seeing enhancement of the technology to make the trade more accessible and practical. With the help of advanced technology, a higher volume of stock trading is executed every day. Most of the trade used to happen in BSE.
However, it had less transparency and several clearance-related problems. Therefore fraudulent activities start happening in BSE at a higher level. Therefore, SEBI, the Security Exchange Board Of India, decided to develop some crucial financial regulators.
Some Major Scams of The Indian Share Market
There are some significant scams in the Indian stock market that every investor or trader should know. Some popular scams are the Harshad Mehta Scam of the early nineties and Ketan Parikh’s Scam. Let’s understand these two scams in a bit more detail.
Scam Of Harshad Mehta
Harshad Mehta was one of the famous traders who used loopholes of the bank’s interbank transactions using his bank receipt. He used to operate his ultra risky stock market operation with the help of inter-bank transactions.
Scam Of Ketan Parikh
Ketan Parikh also used his brain and stories about the Y2K bug. He used this to place bids for digital commodities at a stratospheric level.
How National Stock Exchange or NSE Come Into Existence?
These scams alarms to have a new stock exchange that has capabilities to compete with BSE to reduce the level of scams that were happening at that time. Therefore, NSE, the National Stock Exchange, came in 1992, was recognized in 1993, and started stock exchange activities in 1994. NSE was the first stock exchange using the electronic method to do trading and investing activities. Seeing this, BSE also introduced its electronic bidding methods for traders and investors.
BSE started its sensitivity Index, which is also known as Sensex or S&P BSE Sensex. It has 30 listed companies, and based on it; it measures the performance of the stock exchange. It also allowed the facility to trade for equity shares in 2000 and established India’s first free float index in 2001. NSE also launched its benchmark exchange, the CNX50, known as nifty50, in 1996. It has 50 listed stocks, and functions based on exchange.
Current Stock Exchange Scenarios in India
NSE and BSE both have become the most integral stock exchanges of India. They are the two stock exchanges of India because, after the independence, 23 stock exchanges in India also took place, and now there are only seven left. And rest are listed as a defunct exchange by the SEBI. Now, you can trade in BSE, NSE, NSE international Exchange, CSE Kolkata, Magadh Stock Exchange, IIX, and MSEI.
These days Indian stock exchanges are advanced and allow trading in a transparent and open environment. But still, many brokers and traders are causing this market with their scams. However, with the advancement of technology and awareness, the number would reduce.
So, this was the history of the Indian stock exchange, which started from the Banyan Tree of Town Hall of Bombay and is now established with two leading stock exchanges BSE and NSE. With the help of these two small to high-level, investors are getting the opportunity to increase their wealth by investing in top trusted shares of the companies.
So, I hope you like this post and gain many essential terms; please share your thoughts in the comment section.