India is all set to celebrate 75 years of independence on Monday. India has come a long way since its independence from British rule, and so have the country’s stock markets. Stock exchange trading in India started in the year 1855. Bombay Stock Exchange, now known as BSE, the very first stock exchange in Asia, was established in 1875. The Government of India officially recognized BSE under the Securities Contract Regulation Act in 1957. It should be noted that India’s most valuable company, in terms of market capitalization, went public in the 1970s. These are important milestones in the transformation of Indian stock markets since independence.
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1963: UTI – India’s 1st Mutual Fund
The Reserve Bank of India (RBI) along with the Government of India formed Unit Trust of India (UTI), India’s first mutual fund in 1963. In 1987, SBI Mutual Fund, the first non-UTI mutual fund in India, was created. In 1993, the first Mutual Fund Regulations came into existence, requiring all mutual funds, except UTI, to be registered and managed.
1977: Reliance Industries IPO – The Long-Awaited IPO
Reliance Industries, now the largest publicly traded company in India with a market capitalization of Rs 17.5 lakh crore, launched an initial public offering (IPO) in 1977. The company was then under the control of Dhirubhai Ambani and was known as Reliance Textiles Industries Ltd. The issue was oversubscribed seven times. Reliance had issued 2.8 million shares of Rs 10 each in its first share sale to public investors in November 1977. Through this public offer, Reliance founder Dhirubhai Ambani is said to have introduced an equity cult in India. After 45 years, Reliance Industries stock rose to Rs 2,855 each.
1986: The Birth of BSE Sensex
Founded in 1986, S&P BSE Sensex was calculated using a “Market Capitalization – Weighted” methodology of 30 component stocks across key sectors. The base year of S&P BSE Sensex was taken as 1978-79. Since September 1, 2003, the barometer of 30 stocks is calculated using a free-float market capitalization method. Major index providers such as MSCI, FTSE, STOXX and Dow Jones use the free-float methodology. The Sensex is also considered by many to be the barometer of India’s business progress, a measure of the impact of economic progress on the Indian business sector. The top ten companies by weight on the Sensex are now Reliance Industries, Tata Consultancy Services (TCS). HDFC Bank, Infosys, Hindustan Unilever Ltd (HUL), ICICI Bank, State Bank of India (SBI), Bajaj Finance, Life Insurance Corporation of India (LIC) and Housing Development Finance Corporation (HDFC).
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1992: Harshad Mehta Scam
In the early 1990s, Harshad Mehta was one of the largest stock exchange operators in Dalal Street. Harshad Mehta was charged with numerous financial crimes that took place in the 1992 Securities Scam worth over Rs 4,500 crore. He was involved in a large-scale stock manipulation scheme and his company brokered transactions between banks. After the Harshad Mehta scam was reported, the stock market collapsed and BSE remained closed for a month.
1992: National Stock Exchange
The National Stock Exchange (NSE) was founded in 1992 and was recognized as a stock exchange in April 1993 by the capital market regulator SEBI (Securities & Exchange Board of India). NSE started operations in 1994 with the launch of the debt market, and cash market segment. In 1996, the exchange started trading and settlement of dematerialized securities. In the same year, NSE launched the Nifty 50 Index, a broader benchmark compared to BSE Sensex. It also followed the same trading mechanism, trading hours and settlement process. In 2000, the exchange launched index futures based on the Nifty 50 index and quoted index futures on Nifty 50 on the Singapore Exchange and introduced internet trading.
2000: Derivatives Trading
On 9 June 2000, BSE launched the first exchange traded index derivative contract in India futures on the Sensex. In the following year, the National Stock Exchange launched index futures based on the Nifty 50 index and quoted index futures on Nifty 50 on the Singapore Exchange and introduced internet trading. The Exchange has also introduced trading in futures and options contracts based on Nifty IT, Nifty Bank and Nifty Midcap 50, Nifty Infrastructure, Nifty PSE, Nifty CPSE indices.
1992: FIIs start investing in India
In 1992, Foreign Institutional Investors (FIIs) were allowed to invest in the Indian stock markets for the first time. India became an attractive destination for foreign investors after the historic economic liberalization. Since then, Indian stock markets have been largely fueled by foreign institutional investors.
2021-2022: LIC, Paytm – Two biggest IPOs to date
The public issuance of Rs 21,000 crore from LIC is the largest ever seen by Dalal Street in May this year. The issue had received a strong response from all investor categories with a huge six-day subscription window as opposed to the usual three-day window. Paytm’s Rs 18,300 crore IPO is the second largest public issue to date.