Bombay Stock Exchange

BSE Limited, also known as the Bombay Stock Exchange (BSE), is an Indian stock exchange which is located on Dalal Street, known as the Wall Street of Mumbai, in turn described as the New York of India. Established in 1875 by cotton merchant Premchand Roychand, it is the oldest stock exchange in Asia, and also the tenth oldest in the world. The BSE is the world's 7th largest stock exchange with a market capitalization exceeding US$5 trillion as of May 2024.

History

Bombay Stock Exchange was founded by Premchand Roychand in 1875. While BSE Limited is now synonymous with Dalal Street, it was not always so. In the 1850s, five stock brokers gathered together under a Banyan tree in front of Mumbai Town Hall, where Horniman Circle is now situated. A decade later, the brokers moved their location to under the banyan trees at the junction of Meadows Street and what was then called Esplanade Road, now Mahatma Gandhi Road. With a rapid increase in the number of brokers, they had to shift places repeatedly. At last, in 1874, the brokers found a permanent location, the one that they could call their own. The brokers group became an official organization known as "The Native Share & Stock Brokers Association" in 1875.

On 12 March 1993, a car bomb exploded in the basement of the building during the 1993 Bombay bombings. The BSE is also a Partner Exchange of the United Nations Sustainable Stock Exchange initiative, joining in September 2012. BSE established India INX on 30 December 2016. India INX is the first international exchange of India. BSE became the first stock exchange in the country to launch commodity derivatives contract in gold and silver in October 2018.

BSE was demutualized and corporatized on 19 May 2007, pursuant to the BSE (Corporatization and Demutualization) Scheme, 2005 notified by SEBI. It was listed on NSE on 3 February 2017.

Market statistics

• The Bimal Jalan Committee report estimated that barely 3% of India's population invested in the stock market, as compared to 27% in the United States and 10% in China.
• The Economic Times estimated that as of April 2018, 6 crore (60 million) retail investors had invested their savings in stocks in India, either through direct purchases of equities or through mutual funds.
• Morgan Stanley has noted that the Indian stocks have been through four bear markets in 25 years, or since foreign investors became actively involved with Indian equities. The Economic Times estimate that the Indian stock market sees a bear market on average once every 3 years, similar to the US market. It uses the Nifty 50 index as a reference point and identifies eight 20% drops in the last 25 years.
• According to SEBI, during FY 2022–23, 73% of mutual fund units were redeemed within 2 years of investment. Only investments in 3% of the units continued for more than 5 years.
• Another study conducted by the SEBI, approximately 89% of individual stock traders in the equity Futures & Options (F&O) segment incurred losses during the financial year 2021-22.
• According to a Reserve Bank of India report, mutual funds attracted 6% of household savings in FY2023 and less than 1% went into direct equities. Almost 95% of household savings in India are held in bank deposits, including fixed deposit, provident fund, PPF, life insurance, and various small savings schemes.
• Maharashtra accounts for the most number of investors. More than 15 million or 21 percent of registered investors with the BSE are from the state, followed by Gujarat (8.6 million), Uttar Pradesh (5.3 million), Tamil Nadu (4.3 million) and Karnataka (4.2 million). These five states account for more than half or 53 percent of all the registered investors.

Criticism and controversies

The Indian stock exchanges BSE and NSE have witnessed several high-profile corruption scandals. At times, the Securities and Exchange Board of India (SEBI) has barred several individuals and entities from trading on the exchanges for insider trading, stock manipulation, especially in illiquid mid-caps, small-caps and penny stocks.

Market operators illegal activity

Market operators continue to operate in the Indian stock market, albeit within a regulatory framework aimed at ensuring transparency and fairness. Market operators are individuals or entities that actively engage in buying and selling securities to influence their prices for profit. They operate through various strategies, such as arbitrage, short selling, high-frequency trading, front running, churning, scalping, wash trading, spoofing, and layering, often leveraging sophisticated technology and large capital. Regulatory bodies like the Securities and Exchange Board of India (SEBI) oversee market activities to curb malpractices such as insider trading, price rigging, and market manipulation. SEBI has implemented measures, including surveillance systems, to detect and penalize unethical practices. Despite these regulations, market operators exploit loopholes to gain an edge, necessitating continuous vigilance and regulatory updates. Market operators in India often use the "pump and dump" strategy, despite strict regulations against such practices. The "pump and dump" scheme involves artificially inflating the price of a stock (pump) through false or misleading positive statements. Once the price has been significantly raised, the operators then sell off their holdings (dump) at the inflated prices, leading to a sharp price decline and substantial losses for other investors who bought in at the higher prices. Their activities have continued to impact market volatility, liquidity, and price discovery, playing a significant role in the dynamics of the Indian stock market.

See also

References

Notes

Citations

Further reading

External links

• Official website