History Of Indian Stock Market in short

To some people, the stock market will always be a risky business, but if you play your cards right, it can turn into the “Eighth Wonder Of The World”.

The stock market can literally turn dreams into reality.

With the ever-increasing and expanding economy, the Indian Stock Market is achieving its heights. It’s clearly evident now.

Unluckily India is the second most affected country by coronavirus but still, the Indian stock market is maintaining its levels.

The Indian stock market is one of the most exciting stock markets in the world.

I bet you, that entering this market would provide you with experiences that you have never experienced ever.

Indian stock market has been able to provide exceptional performance in recent years, back in 2014 our market emerged to be among the world’s best performers.

HISTORY OF INDIAN STOCK MARKET

Pre-Independence Phase

The Indian stock market has an extremely fascinating and rich history with a simple and informal start.

Security trading was introduced in India by Britishers back in the 18th century when East India Company began trading in loan securities.

The Born of BSE

Particularly Corporate shares started trading in the 1830s in Bombay.

These shares mostly belonged to banks and cotton mills. Slowly and steadily this expanded, till the mid of 18th century, 22 share brokers began trading at opposite the town hall of Bombay under a banyan tree, that tree still stands there!

As this platform kept on expanding, more and more people started getting involved in it. To accommodate more stockbrokers, the town hall location had to be shifted to a group of banyan trees at the meadow street junction. This shift continued taking place as the no. of stockbrokers increased.

Finally, they settled at Dalal Street in 1874.

This group was considered informal until they organized themselves as the Bombay Stock Exchange (BSE) in 1975.

The BSE is the oldest stock exchange in Asia.

After BSE, Ahmadabad Stock Exchange was formed in 1894 mainly focusing on textile mills. Then Calcutta Stock Exchange and Madras Stock Exchange followed in 1894 and 1920 respectively.

These stock exchanges were still private entities serving their native areas and there was no regulatory act that contained them.

This further led to the introduction of the Securities Contract (Regulation) Act of 1956. BSE was the first exchange to be granted permanent recognition under this act.

Post Independence Phase

Post-independence, BSE dominated the stock market.

Although BSE dominated the volume of trading still low transparency, informal clearing, settlement system, and many other factors were a cause of worry.

Born of SEBI

The need for a Stock Market regulator was being felt by every investor. This led to the formation of SEBI in 1988 and as a non-statutory body (especially formed by the government without passing any act of Parliament) in 1992.

Born of NSE

After the Harshad Mehta Scam in 1992, people weren’t able to trust BSE, transparency was needed.

This led to the formation of the National Stock Exchange (NSE) in 1992 itself which got recognized as a stock exchange in 1993 and trading began on it in 1994.

Here trading took place electronically. Responding to this BSE also launched its electronic trading system known as BSE online trading (BOLT) in 1995.

Born of Sensex

The BSE launched its sensitivity index called Standard and Poor’s BSE Sensex in 1986. It is an index of 30 companies and depicts the overall performance of the exchange.

Born of Nifty50

Reacting to this NSE also launched its sensitivity index, CNX Nifty, now known as Nifty 50, in 1996. It also depicted the overall performance of the exchange, but unlike BSE it consisted of 50 companies.

CURRENT STOCK EXCHANGES

NSE and BSE still dominate the stock market. With over 5500 companies listed on BSE and approx 1900 on the NSE. However, significant companies are listed on both exchanges. Both exchanges are having similar mechanisms and a market cap of around US $2.2 trillion.

BSE and NSE are not the only stock exchanges. Post-independence 24 stock exchanges were present. However, now we are only having 9 recognized stock exchanges and they are:

  1. Bombay Stock Exchange Ltd.
  2. National Stock Exchange Ltd.
  3. Calcutta Stock Exchange Ltd.
  4. Indian Commodity Stock Exchange Ltd.
  5. Metropolitan Stock Exchange of India Ltd.
  6. India International Exchange (India INX)
  7. NSE IFSC Ltd.
  8. Multi Commodity Exchange of India Ltd.
  9. National Commodity & Derivatives Exchange Ltd.

SECTORIAL INDICES

The stock market is divided into different sectors representing their contribution to the market. A sector constitutes a no. of different publicly traded companies; they share similar objectives and provide similar products and services. Some of the major listed sectors that have a considerable contribution to the economy are:

  • BANKING SECTOR
  • AUTOMOBILE SECTOR
  • INFORMATION TECHNOLOGY SECTOR
  • METAL SECTOR
  • REAL ESTATE SECTOR
  • FMCG SECTOR
  • MEDIA & ENTERTAINMENT SECTOR
  • PHARMACEUTICALS SECTOR
  • POWER SECTOR
  • PSU BANK SECTOR
  • FINANCIAL SERVICES SECTOR
  • OIL & GAS SECTOR

TRADING HOURS AND SETTLEMENT

Equity markets used to follow T+1 settlement, but in the future, it will be brought down to T means the trade will be settled on the same day it was initiated.

Trading on stock exchanges takes place between 9:15 a.m. and 3:30 p.m., Indian Standard Time (+ 5.5 hours GMT).

FACTORS AFFECTING THE INDIAN STOCK MARKET

The stock market is extremely volatile and past situations are evidence of that. This volatility brings opportunities as well as risks and to be aware of those we must know about the factors on which the stock market depends. Some considerable factors are:

MONETARY POLICIES BY RBI

RBI commands the flow of money among people in the country by making necessary policies. RBI revises its policies on a regular basis to control inflation. In Layman’s terms, when RBI increases repo rates, lending (loan) rates are also increased; this, in turn, decreases liquidity in the market. This decreased liquidity in the economy has an adverse effect on the stocks and vice–versa. This situation shows how regulations made by RBI directly affect the stock market.

POLITICS

Indian stock market is hugely impacted by politics and it was clearly evident when the stock market touched its peak under when NDA govt. was formed. Unstable govt. affect the market adversely, after all, the growth of a country is dependent on politicians. Policies made by govt. also, affect the market positively as well as negatively.

INTERNATIONAL RELATIONS

This factor is very much evident and plays a great role in the stock market’s performance. Recent situations support this statement, whenever tensions between India and China escalated, the stock market was affected adversely. Also when govt. like USA and Japan support Indian trade by allowing permissions or by reducing trade barriers related stocks tend to boom.

SCAMS

Scams are extremely unfortunate for Indian stock markets, out of those “price rigging” is the main one. People lose their trust in markets and a major bearish sentiment is carried on. Past scams like the Ketan Parekh scam or the Harshad Mehta scam were a complete disgrace to the market.

WIDE-REACHING INCIDENTS

This refers to any incident that affects a large no. of people. It can be natural as well as man-made. These types of incidents can affect the demand for products, cost of raw materials, import-export, and transportation cost, all affecting the price of goods as all the countries, are interdependent, directly or indirectly. Change in the price of goods further affects our stock market. This includes incidents such as natural disasters, pandemics, man-made disasters, etc.

Indian Big Bulls

We come across movie scenes that show people multiplying money by luck and then a thought comes across our mind- ‘These miracles only happen in movies. But it’s not the case with the stock market.

For real, there are many people who’ve made their fortune just by means of the stock market.

Our special article would be incomplete if we don’t mention these miracles happening to people like you and me.

Who knows, you might be the next one.

RAKESH JHUNJHUNWALA

Popularly known as “The Big Bull” or the “Indian Warren Buffet”; is one of the most successful traders & investors.

He belonged to a finance background as his father was an income tax officer, being a chartered accountant himself.

He was very much interested in the stock market. He started investing with Rs. 5000 only. His investment career got a boost when he bought 5000 shares of Tata tea for Rs. 43 and sold them for Rs. 143 in just 3 months.

Later he bought 6 crore shares of Titan for Rs. 3 approx in 2003. The stock is still in his portfolio and is trading around Rs. 2500+. Just unbelievable!

Now he also owns an asset management firm, RARE Enterprise, and works as a chairman of Aptech Ltd. and Hungama digital media Pvt. Ltd.

On 14th Aug 2022 due to some health issue, he died at the age of 62.

RADHAKISHAN DAMANI

Radhakishan Damani is one of the simple and richest investors who prefer to stay away from public conferences and press releases.

After his father’s death, he had to close his ball-bearing business and started assisting his brother in their stockbroking business, which was inherited from their father.

He knew that to make more money he can’t just sit back and look at other’s investing, so he started investing himself. He had limited knowledge of investing but he knew the potential of the Indian stock market.

Initially, he made a few mistakes, then he learned from those mistakes and kept on increasing his knowledge, at last, he became successful.

After becoming a successful investor, he observed that being an investor he was just a part of others’ success stories. Then he started his own company- D Mart, which is a giant and successful retail chain in India. He also owns Bright Star Investment firm and also acts as a decision-maker for many big firms like India Cements.

PORINJU VELIYATH

This man was born in a lower-middle-class family in Kochi and had a life full of struggles and hardships, initially.

He went to Bombay in 1990 in search of a job and worked in a stockbroking firm. He was an absolute beginner at the stock market. Working 4 years in a stockbroking firm he gained knowledge and became an expert. Then he got a job as a Research analyst and fund manager in another firm.

In 1999 he went back to Kochi and started investing himself. He started with investing in ‘Geojit Financial services’ and got multifold returns with that. Believing in himself, he started his own Portfolio management firm called ‘Equity Intelligence. Today he is listed among the richest investors and has picked many stocks that have given multifold returns.

VIJAY KEDIA

Vijay Kedia belonged to a family of stockbrokers. After his father’s death, he had to continue his father’s business. He started with trading, lost some amount in that then realized that trading was not his cup of tea. He learned stock analysis and then changed into an investor. In all, he had around Rs. 35000 at that time. He invested that amount in Punjab Tractors. Within 3 years that investment multiplied to 6 times! Exiting that, he invested all the returns in ACC. The stock had a very little movement for a year, later that stock gave 10 times returns. Today he is one of the richest Indian investors.

These are just a few examples. There are many more people like them.

When they can do it, why can’t you?

FUTURE OPPORTUNITIES IN THE INDIAN STOCK MARKET

Experts believe that the Indian stock market will outperform in the future. The stock market depends on the economy of the country. We know that due to the pandemic we had a bad result for GDP. We have to keep one thing in mind that other developed countries have also reported negative GDP at the same time.

In the recent past, Deutsche Bank, also stated that the Indian economy is likely to grow to $ 7 trillion by 2030. Amid the pandemic situation and the US-China trade war one thing that turned out to be fruitful for India is that foreign companies have their production bases in India and some even expanded their existing bases e.g. apple, Samsung, etc. This will generate employment for Indians, contribute towards the GDP, and would definitely have a positive impact on the Indian economy in the Long term.

How Many Indians Invest In Indian Stock Market?

According to data from the National stock exchange (NSE), there are 10 crore active investors in India, a country of 138 crore people, as of 6 September 2022.

When the number of Indian investors grows our stock market automatically grows as the dependency of foreign investors decreases.

Most well-known investors are optimistic about the Indian Economy. We also need to think the same about our economy and keep working hard. After all, we belong to a country where people are considered to be most ambitious and hard-working, everybody comes across hurdles and challenges, be it a person or a country but being hardworking we can overcome those hurdles whether it is a pandemic or anything else.

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