4.4 History of stock markets

Hanumant Dhokle


World History:

History says that the stock market originated in Europe during the 12th century. But major developments in the stock market took place in the US after the initiation of the New York Stock Exchange (NYSE) in 1892. Interestingly, most stock markets in the world took their birth and started operating either under a banyan tree or a neem tree.

Indian History:

The history of the Indian stock market is about 200 years old. Prior to this, hundis and bills of exchange were in use, especially in the medieval period, which can be considered as a form of virtual stock trading but it was certainly not an organised form of stock trading. Records of stock trading can be traced only after the arrival of East India Company. The first organised stock market that was governed by rules and regulations came into existence in the form of the Native Share and Stock Brokers Association in 1875. After undergoing numerous changes, this association is today better known as the Bombay Stock Exchange (BSE).

During this period several other exchanges were launched. Many of these have now closed down. At present, there are 19 recognised stock exchanges and two derivative exchanges. The BSE and the National Stock Exchange (NSE) are national exchanges (with nationwide participation) and the others are regional ones. The volume of trade in the regional exchanges is negligible. The formation of the Securities and Exchange Board of India
(SEBI) has brought substantial transparency in share market practices and thus managed to bring in the trust of domestic and international investors.

1800s Recognition from banks and merchants to about half a dozen brokers.
1830s Business on corporate stocks and shares in bank and cotton presses started in Bombay. Trading list by the end of 1839 got broader.
1840s Recognition from banks and merchants to about half a dozen brokers.
1850s Rapid development of commercial enterprise saw brokerage business attracting more people into the business.
1860s The number of brokers increased to 60.
1860-61 The American Civil War broke out which caused a stoppage of cotton supply from the United States of America, marking the beginning of the ‘share mania’ in India.
1862-63 The number of brokers increased to about 200 to 250.
1865 A disastrous slump began at the end of the American Civil War (for example, Bank of Bombay’s share which had touched Rs 2,850 could be sold at only Rs 87).
1874 With the rapidly developing share trading business, brokers used to gather at a street (now well known as Dalal Street) for the purpose of transacting business.
1875 The Native Share and Stock Brokers Association (also known as The Bombay Stock Exchange) was established in Bombay.
1880s 1880s Development of the cotton mills industry and setting up of many others.
1894 Establishment of the Ahmedabad Share and Stock Brokers Association.
1880-90s Sharp increase in share prices of jute industries in 1870s was followed by a boom in tea stocks and coal.
1908 The Calcutta Stock Exchange Association was formed.
1920 Madras witnessed a boom and business at the Madras Stock Exchange was transacted with 100 brokers.
1923 When recession followed, the number of brokers came down to three and the exchange was closed down.
1934 Establishment of the Lahore Stock Exchange.
1936 Merger of the Lahore Stock Exchange with the Punjab Stock Exchange.
1937 Re-organisation and set up of the Madras Stock Exchange Limited led by improvement in stock market activities in south India with establishment of new textile mills and plantation companies.
1940 Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited were established.
1944 Establishment of the Hyderabad Stock Exchange Limited.
1947 The Delhi Stock and Share Brokers Association Limited and the Delhi Stocks and Shares Exchange Limited were established and later on merged into the Delhi Stock Exchange Association Limited.
1986 BSE launched a stock index for its market as sensitive index known as Sensex.
1993 Establishment of the National Stock Exchange (NSE).
1995 BSE replaced open outcry system with Online Trading System.
1996 Launch of S&P CNX Nifty.
1996 Commencement of trading/settlement in dematerialised securities.
2000 Commenced operations in the Derivatives segment.

Current Scenario In Indian Stock Markets:

  • BSE and NSE are the leading stock exchanges.
  • There are 19 stock exchanges and two derivative exchanges in India.
  • BSE is the oldest stock market in Asia.
  • BSE is the biggest stock exchange in the world in terms of number of companies listed. There are over 4,000 companies listed on BSE.
  • NSE is the biggest in terms of turnover per day.
SEBI Registered Market Intermediaries Statistics
Market Intermediaries Number Of Intermediaries
Year 2000 2007 2008
Stock Exchanges (Cash Market) 23 21 19
Stock Exchanges (Derivatives Market) 2 2 2
Brokers (Cash Segment) 9,192 9,443 9,487
Corporate Brokers (Cash Segment) 3,316 4,110 4,190
Sub-Brokers (Cash Segment) 5,675 27,541 44,074
Brokers (Derivative) 0 1,258 1,442
Foreign Institutional Investors 506 997 1,319
Depositories 2 2 2
Depository Participants 96 593 654
Underwriters 42 45 35
Credit Rating Agencies 4 4 5
Registrars To An Issue & Share Transfer Agents 242 82 76
Mutual Funds 38 40 40
Source: SEBI Handbook 2008      
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