Part 5 - The Story Timeline of BSE NSE From Floor Trading to Digital Revolution
Part 5 - The Story Timeline of BSE NSE From Floor Trading to Digital Revolution
From Floor Trading to Digital Revolution: The Story & Timeline of BSE & NSE
The history of Indian stock markets, particularly the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), reflects India’s economic evolution, from colonial trade to a global financial powerhouse.
Below, I provide a detailed history of the BSE and NSE, alongside other Indian stock markets, tracing their origins, milestones, challenges, and contributions to India’s financial ecosystem.
Bombay Stock Exchange (BSE): A Deep History
Origins (1830s–1875):
From Banyan Tree to Formal Exchange
Early Beginnings: Stock trading in India began in the 1830s in Bombay (now Mumbai), driven by the East India Company’s loan securities and shares of banks and cotton presses.
By the 1850s, informal trading occurred under a banyan tree near Horniman Circle, with 22 brokers dealing in shares of textile mills, railways, and opium/textile trade.
Formation of BSE (1875):
On July 9, 1875, the Native Share and Stock Brokers’ Association was established, formalizing trading and marking the BSE as Asia’s first stock exchange.
Located on Dalal Street, it catered to the growing demand for securities amid India’s industrial boom, particularly in cotton and jute.
Early Operations:
Trading was conducted manually, with brokers meeting physically. The BSE facilitated capital raising for colonial-era industries, including railways and textile mills, laying the foundation for modern capital markets.
Pre-Independence Growth (1875–1947)
Industrial Expansion:
The BSE grew with India’s industrialization, listing companies in textiles, tea, and jute. World War I (1914–1918) boosted demand for war-related goods, increasing trading volumes, while World War II (1939–1945) furthered growth in steel and cement industries.
Challenges:
Colonial policies limited Indian ownership, and markets faced volatility from global trade disruptions. Despite this, the BSE became a hub for wealthy Indian merchants and British investors.
Regulation:
The Bombay Securities Contracts Control Act of 1925 provided early oversight, but regulation remained rudimentary.
Post-Independence Era (1947–1980s): Institutionalization and Sensex Launch
Post-1947 Growth:
After independence, the BSE supported India’s push for self-reliance, listing companies in new sectors like steel (Tata Steel) and chemicals. The Securities Contracts (Regulation) Act of 1956 formalized stock exchange operations, requiring government approval for listings.
Unit Trust of India (1964):
The UTI’s US-64 scheme introduced mutual funds, raising ₹6,400 crore by 1988 and popularizing equity investment among retail investors.
Reliance IPO (1977):
Dhirubhai Ambani’s Reliance Industries IPO sparked a “cult of equity,” drawing middle-class investors.
In 1982, a bear cartel targeted Reliance, dropping its share price from ₹131 to ₹121, but Ambani’s counter-strategy stabilized it, showcasing market resilience.
Sensex Launch (1986):
On January 2, 1986, the BSE launched the Sensitive Index (Sensex), a 30-stock benchmark with a base value of 100 (1978–79). It became India’s primary market indicator, reflecting economic trends.
SEBI Formation (1988):
The Securities and Exchange Board of India (SEBI) was established as a non-statutory body to regulate markets, gaining statutory powers in 1992 after the Harshad Mehta scam.
1990s: Liberalization and Scandals
Economic Liberalization (1991):
India’s market opened to foreign institutional investors (FIIs), boosting BSE’s growth. Foreign investment inflows surged, and the Sensex crossed 1,000 points in 1990.
Harshad Mehta Scam (1992):
Broker Harshad Mehta manipulated stock prices (e.g., ACC Ltd. from ₹200 to ₹9,000) using fraudulent bank funds, inflating the Sensex to 4,467 points before a 13% crash (570 points). The scam, involving ₹4,000 crore, exposed regulatory gaps, prompting SEBI’s empowerment and stricter oversight.
Technological Shift:
In 1995, the BSE introduced the BSE On-Line Trading (BOLT) system, replacing open-outcry with electronic trading, enhancing efficiency and transparency.
Global Integration:
The BSE listed more companies, reaching over 5,000 by the late 1990s, reflecting India’s growing corporate sector.
2000s–2010s: Global Crises and Recovery
Ketan Parekh Scam (2001): Broker Ketan Parekh manipulated tech and media stocks, causing a market crash.
SEBI introduced reforms, including circuit breakers and dematerialization via depositories (NSDL, 1996).
Global Financial Crisis (2008):
The Sensex fell from 21,206 in January to 8,701 in November, losing 60% of its value. Recovery followed with economic stimulus and FII inflows, with the Sensex reaching 20,000 by 2010.
Market Cap Milestone (2014):
The BSE’s market capitalization crossed ₹100 lakh crore, reflecting India’s economic rise. It listed over 5,500 companies by 2015.
Demonetization (2016):
The Sensex dropped 6% (1,688 points) after the November 2016 demonetization announcement, but recovered as digital transactions grew.
2020s: Digital Boom and Global Leadership
COVID-19 Crash (2020):
The Sensex plummeted from 42,273 to 28,288 points in March, losing ₹13.88 trillion in investor wealth. A swift recovery followed, driven by retail investor participation and tech stocks, with the Sensex hitting 50,000 in February 2021.
Retail Investor Surge:
By 2021, 7 crore Demat accounts were opened, reflecting a retail investment boom fueled by digital platforms and IPOs.
Global Ranking (2024):
The BSE’s market cap reached $5 trillion, making India the fourth-largest stock market globally, surpassing Hong Kong. It lists over 5,000 companies, with a focus on tech, finance, and consumer goods.
Recent Volatility (2025):
On April 7, 2025, the Sensex fell 2.95% (2,226.79 points) to 73,137.90, driven by global trade war fears, highlighting ongoing sensitivity to external factors.
BSE Today:
The BSE is a global leader, offering equity, derivatives, and debt instruments. Its Sensex remains a barometer of India’s economy, and BOLT ensures seamless trading. The exchange supports SMEs via its SME platform (2012) and has embraced ESG (Environmental, Social, Governance) investing.
National Stock Exchange (NSE): A Deep History
Origins (1992–1994):
A Response to BSE Limitations
Formation (1992):
The NSE was incorporated in November 1992, prompted by the Harshad Mehta scam, which exposed BSE’s inefficiencies and lack of transparency. Backed by financial institutions like IDBI, LIC, and SBI, the NSE aimed to modernize trading.
Electronic Trading (1994): In November 1994, the NSE launched India’s first fully automated, screen-based trading system for equities, eliminating the open-outcry system. This ensured transparency, speed, and wider access, challenging BSE’s dominance.
Derivatives Trading (1994):
The NSE introduced debt market trading in June 1994, followed by equity trading in November, setting a new standard for market efficiency.
1990s: Rapid Growth and Nifty 50
Nifty 50 Launch (1996):
On April 22, 1996, the NSE introduced the Nifty 50 index, a benchmark of 50 large-cap companies across 12 sectors, with a base value of 1,000 (1995).
It became a preferred index for investors and derivatives trading.
Derivatives Market (2000):
The NSE launched index futures on the Nifty 50 in June 2000, followed by options in 2001.
This revolutionized risk management and attracted global investors.
Market Leadership:
By the late 1990s, the NSE surpassed the BSE in trading volumes, driven by its technology and investor-friendly systems.
It listed over 1,000 companies by 2000.
2000s: Innovation and Global Crises
Technological Advancements: The NSE’s NEAT (National Exchange for Automated Trading) system ensured scalability, handling millions of trades daily.
It introduced internet trading in 2000, democratizing access.
Global Financial Crisis (2008):
The Nifty fell 52% from 6,287 to 2,965 points, but the NSE’s robust systems maintained stability. Recovery was swift, with the Nifty crossing 5,000 by 2010.
Mutual Fund Platform (2009):
The NSE launched a mutual fund distribution platform, enhancing retail participation.
2010s:
Derivatives Dominance and IPO Boom
Derivatives Leadership: By 2015, the NSE became the world’s largest derivatives exchange by contract volume, driven by Nifty futures and options.
It accounted for 90% of India’s derivatives trading.
SME Platform (2012):
The NSE’s Emerge platform supported small and medium enterprises, facilitating capital raising.
Demonetization and Recovery (2016):
The Nifty dropped 6.3% post-demonetization but rebounded as digital payments grew, reflecting India’s economic resilience.
Market Cap Growth:
The NSE’s market cap crossed ₹100 lakh crore by 2017, with over 1,900 listed companies.
2020s:
Digital Transformation and Global Recognition
COVID-19 Impact (2020):
The Nifty crashed 29% in March 2020, from 12,430 to 8,597 points, but recovered to 14,000 by December, driven by tech and pharma stocks.
Retail Boom (2021):
The NSE saw a surge in retail investors, with millions of new Demat accounts. IPOs like Zomato and Paytm drew massive subscriptions.
Global Leader (2024):
The NSE’s market cap reached $4.9 trillion, contributing to India’s $5 trillion total. It remains the world’s top derivatives exchange, with over 11 billion contracts traded annually.
Recent Trends (2025):
On April 7, 2025, the Nifty fell 3.24% (742.85 points) to 22,148.80, reflecting global trade concerns.
The NSE’s robust infrastructure continues to ensure stability.
NSE Today: The NSE is India’s largest exchange, with over 2,000 listed companies and a focus on equities, derivatives, and debt.
Its Nifty 50 is a global benchmark, and innovations like mobile trading apps and ESG indices drive growth. The NSE’s social stock exchange (2022) supports non-profits, enhancing inclusivity.
Other Indian Stock Markets -
While the BSE and NSE dominate, other Indian stock exchanges have played roles in regional and niche markets.
Below is a brief history of key exchanges:
Calcutta Stock Exchange (CSE)
Founded (1908):
Established as the Calcutta Stock Exchange Association, it formalized trading in Kolkata, a major colonial trade hub. It focused on jute, tea, and coal companies.
Growth:
By the 1920s, the CSE was India’s second-largest exchange, listing over 1,000 companies. It thrived during World War II due to industrial demand.
Decline:
Post-1990s liberalization, the CSE lost ground to the BSE and NSE due to slower adoption of electronic trading. SEBI’s 2012 exit policy for regional exchanges reduced its relevance.
Status:
By 2025, the CSE has minimal activity, with trading suspended since 2018 due to low volumes and regulatory issues.
Ahmedabad Stock Exchange (ASE) -
Founded (1894):
Established to trade shares of textile mills in Ahmedabad, a cotton hub. It was India’s second-oldest exchange after the BSE.
Role:
The ASE supported Gujarat’s industrial growth, listing local companies. It peaked in the 1980s with over 2,000 listings.
Decline:
The NSE’s electronic trading and SEBI’s regulations marginalized the ASE. It ceased trading in 2018 under SEBI’s exit policy.
Status:
Defunct by 2025, with no active operations.
Madras Stock Exchange (MSE) -
Founded (1937):
Established in Chennai to serve South India’s industrial and plantation sectors, including tea and rubber.
Growth:
The MSE listed regional companies and thrived until the 1990s, supported by Tamil Nadu’s banking and manufacturing sectors.
Decline:
Post-liberalization, it struggled against the NSE’s dominance. It merged with the NSE in 2015, ceasing independent operations.
Status: Defunct by 2025, fully integrated into the NSE.
Multi Commodity Exchange (MCX)
Founded (2003): India’s first commodity derivatives exchange, based in Mumbai, focusing on metals, energy, and agricultural products.
Growth:
The MCX became India’s largest commodity exchange, with gold and crude oil futures driving volumes. It listed on the BSE in 2012.
Regulation:
SEBI’s oversight since 2015 strengthened its framework. The MCX launched options trading in 2017.
Status (2025):
Active, with significant trading volumes, complementing equity exchanges like the BSE and NSE.
India International Exchange (India INX)
Founded (2017):
Launched in GIFT City, Gujarat, as India’s first international exchange, operating 22 hours daily to align with global markets.
Role:
Offers trading in equity derivatives, currency, and commodities, targeting offshore investors. It lists global depository receipts and debt securities.
Status (2025):
Growing, with increasing FII participation, positioning GIFT City as a global financial hub.
Other Regional Exchanges: Exchanges like the Delhi Stock Exchange (1947), Bangalore Stock Exchange (1963), and Hyderabad Stock Exchange (1943) were active until the 2000s but closed or merged with the NSE/BSE by 2015 due to SEBI’s exit policy, which mandated minimum trading volumes and net worth.
Key Insights and Comparative Analysis
BSE’s Legacy: As Asia’s oldest exchange, the BSE laid the foundation for India’s capital markets, evolving from manual trading to a tech-driven platform. Its Sensex is a cultural and economic symbol, though it trails the NSE in trading volumes.
NSE’s Innovation:
The NSE revolutionized Indian markets with electronic trading and derivatives, capturing 90% of equity and derivatives volumes. Its Nifty 50 is preferred by global investors for its diversity and liquidity.
Regional Exchanges’ Decline:
Liberalization and technology favored centralized exchanges (BSE/NSE), marginalizing regional players. The CSE, ASE, and MSE couldn’t compete with automated systems and SEBI’s regulations.
Regulatory Evolution:
SEBI’s formation (1988/1992) and reforms post-scams (1992, 2001) strengthened market integrity.
The Securities Contracts (Regulation) Act (1956) and depositories (NSDL/CDSL) ensured stability.
Global Impact:
India’s $5 trillion market cap (2024) reflects BSE and NSE’s global stature. The NSE’s derivatives leadership and BSE’s SME focus highlight complementary roles.
Challenges:
Scandals (Harshad Mehta, Ketan Parekh), global crises (2008, 2020), and political events (demonetization, elections) have tested resilience, but robust systems and retail growth have sustained progress.
Future Outlook:
Digital platforms, ESG investing, and GIFT City’s India INX signal India’s ambition to rival global hubs like New York and London.
Supporting Data (2025 Context)
BSE: Market cap ~$2.5T, 5,000 listed companies, Sensex at ~73,137.90 (April 2025). Key sectors: Finance, IT, Consumer Goods.
NSE: Market cap ~$4.9T, 2,000+ listed companies, Nifty at ~22,148.80 (April 2025). Leads global derivatives with 11B+ contracts.
Total Market Cap: India’s stock market reached $5T in 2024, fourth globally after the U.S., China, and Japan.
Investor Base: Over 20 crore Demat accounts by 2025, with retail investors driving 50% of trading volumes.
This deep history underscores the BSE and NSE’s pivotal roles in shaping India’s financial landscape, with regional exchanges playing historical but diminished roles
India’s stock market journey mirrors the country’s broader economic evolution — from colonial systems and scams to reforms and rapid digitization.
BSE represents the legacy and tradition.
NSE is the symbol of modernization.
Together, they form a robust ecosystem where millions now participate daily.
As of 2025, India is not just a stock market participant but a global leader in equity and derivatives volumes, poised to shape the future of capital markets.
