Imagine yourself standing in front of a Dalal i.e. a broker in 1982, wanting to buy five shares of TATA with some paise in your hand, waiting for the broker to give you a form to fill as the other brokers shout on calls and across floors. Now teleport back into your phone’s online brokerage app where you can place the order of any number of shares in a few seconds.
The Indian stock market is counted as one of the world’s best-performing markets. The NSE today is the second fastest-growing stock exchange in the world besides being the world’s third largest Stock Exchange in terms of equities. BSE is the 11th largest stock exchange in the world besides being cited as the world’s best performing shares market. The stature of the bourses has elevated the position of the Indian stock market on the world map.
This is what the evolution of stock markets looks like. Because we are celebrating Independence Day this week, I thought I’d take a walk down history lane to see how the investment space and equity markets have evolved over the deceased and it’s astonishing to see the transformation. Come along and take that walk with me!
One thing to keep in mind is that this success didn’t come to India overnight. It was a fairly gradual process full of a lot of challenges which dates back to the 18th century when the East India Company began trading in loan securities.
P.S.: To celebrate India’s 77 strong years of Independence, we at Green Portfolio are offering 20% OFF on all our smallcases (one-year plans). Come, celebrate with us!
Been there since the 1800s
In the 1830s, corporate shares started being traded in Mumbai. Most notably, stocks of banks and cotton presses were the ones that were traded.
In 1874 as more brokers jumped onto the bandwagon in downtown Mumbai, Dalal Street was born. Today, Dalal Street has become a metonym for the entire Indian financial sector, much like Wall Street is in the US.
The small group of brokers formed ‘The Native Share & Stockbrokers Association’ in 1875 which is today known as the BSE (formerly Bombay Stock Exchange).
Over the late 19th and early 20th century, exchanges cropped up at Ahmedabad, Calcutta (now Kolkata) and Madras.
To create a structured, transparent, and regulated environment for raising capital and investing which is essential for economic growth and industrialization, India passed the Securities Contracts Regulation Act in 1956, which formalized stock trading.
In 1977, Dhirubhai Ambani’s company, i.e, Reliance Industries got listed in the market. This IPO gathered huge interest from retail investors kickstarting the ‘cult of equity’.
In 1988, the country was marked by a lack of transparency and undependable clearing and settlement systems; making it imperative to set up a financial market regulator. Therefore, the Securities and Exchange Board of India (SEBI) was constituted as a non-statutory body on April 12, 1988, through a resolution of the Government of India. However, the organization came into force in 1992.
In 1992, the National Stock Exchange was established to increase the efficiency of the Indian stock market. It was set up under the government of India based on the recommendations of the Pherwani Committee.
1994: NSE became the first Indian exchange to provide a modern, fully automated screen-based electronic trading system.
In 1996, the NSE launched the Nifty 50 index. The Nifty 50 is a benchmark of the Indian stock market index that represents the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange.
Oh, by the way, there were only about 2 million demat accounts back in 2000 and look at the growth since!
We have gone from paper certificates issued manually to shares getting transferred directly to our demat accounts in a matter of seconds, that too electronically and with regulation.
It’s been a long journey but now, India is among the top five stock markets in the world by market capitalisation. It has been among the most well-performing markets in the world. At present, there are 7 recognized stock exchanges in India including NSE and BSE. There are also over 100 million demat accounts.
Going ahead, we only see more growth in the future. Investment has evolved from being HNI exclusive to being deeply penetrated by individual investors and we only hope for it to become bigger. With the excitement and enthusiasm we have been seeing from the retail investors, we can only imagine what tomorrow looks like. Investors are not scared of any corrections or volatility now and are moving through as we’ve seen this year. Here’s us hoping that India and Indian investors never stop growing. Happy Independence Day!
(The author is Divam Sharma, smallcase Manager, CEO and Co-Founder – Green Portfolio. Views are own)