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The Historical Evolution of the Indian Stock Market

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Whenever someone mentions the Indian Stock Market, it reminds us of the stock market crashes in history. In March 2020, the stock market (for example, BSE Sensex) gave signs of recession, falling from 41,257 on February 14, 2020, to 29,815 on March 27, 2020, i.e., a fall of 28%. 

However, the picture completely changed after that one month of bloodbath in March 2020. The world is observing the shift of power in India. Markets are the leading indicators of the economy. So, the growth of the Indian economy is reflected in the stock market, with the key indices touching new highs over the last year.

Performance of the BSE Sensex from March 2020 to October 2021
Performance of the BSE Sensex from March 2020 to October 2021

The present status of the stock market is the beginning of a new era, but the history of the Indian stock market is also pretty interesting.

Let’s now drill into the history of Indian stock markets.

History of the Indian Stock Market

  • There was a paper trade system wherein the brokers used to get records of the price and quantity at the very inception. The best matches were made manually. This is how the market used to get flooded with quotes and sound over the assembly.
  • The first stock exchange in India was established in 1875 in Bombay, Maharashtra, where the native share and stock broker’s association was formed to trade securities.
  • By 1992, the BSE Sensex rallied from 1000 to 4000, registering a rise of 300%. This was the time of the big bull- Mr Harshad Mehta. His voluminous buying led the market to touch highs and highs.
  • After the scam was known, the SEBI (Securities Board of India) was introduced to regulate the unrequired volatility in the stock market.
  • In 2002 and 2003, the settlement period was revised to T+2 business days, and the BSE Sensex shifted to a free-float market.
  • In 2004, the Indian National Congress came back in power, and people lost faith in the Government. The Sensex falling reflected it by 11.14%, the biggest fall ever. The NSE also launched the ETF listings.
  • After the market fall of 2008, the IPO index was launched. The market time changed from 9:00 AM to 3:30 PM.
  • BSE achieved the landmark of the market capitalisation of Rs 100 lakh crores in 2014, while the SME index crossed the Rs. 10 thousand crores mark
  • Post COVID-19 2020, the market flooded with loads of investment, and new DEMAT accounts were opened. The confidence of retail investors shifted from safe harbours like fixed deposits to stock market investment. In June 2021, a milestone of 7 crores of registered users was recorded.

Source: bseindia.com, nseindia.com

History of Stock Exchanges

The history of the stock exchange represents the history of the Indian stock market. The stock exchange is the platform where the investors trade the stocks. Earlier, there were 8 national and 21 regional stock exchanges in India. After the SEBI started tightening the regulations, it closed down all regional stock exchanges in India except the Calcutta Stock Exchange.

Bombay Stock Exchange

Bombay Stock Exchange (BSE) is Asia’s first stock exchange. It was established in the year 1875. It has various indices, and one of the famous indices is the BSE Sensex. The BSE Sensex comprises 30 stocks listed on the BSE. As per the latest information from the BSE website, there are 18,143 securities listed on March 31, 2021.

Source: bseindia.com

The market has been rising after the setback caused by the COVID-19. Out of all the listed companies in BSE, only 30 top companies are included in the BSE Sensex, which constitutes the index. These 30 shuffles periodically.

Sensex historical performance:

YearBSE Sensex PriceNo. of years since last priceCAGR
19901,048.29
20003,972.121014.25%
201020,509.091017.84%
202047,751.33108.82%
202161,305.95128.39%

CAGR of BSE

The progress of the BSE market can be visualized in the graph below.

History of BSEHistory of BSE

National Stock Exchange

The National Stock Exchange (NSE) was established in 1992. It comprises various indices, and one of the famous indices is the Nifty 50 Index. The Nifty 50 Index comprises 50 entities listed on the NSE. As of March 31, 2021, there are 1920 firms listed on the National Stock Exchange. The Nifty 50 index is nothing but an average of the top 50 companies listed on the National Stock Exchange.

Nifty 50 historical performance:

YearsNifty 50 PriceNo. of years since the last priceCAGR
20001,263.55
20052,836.55517.55%
20105,134.50516.68%
20157,946.3555.31%
202013,981.75511.96%
202118,338.55131.16%

CAGR of NSE

The performance of the index since its inception can be seen in the below graph:

History of NSEHistory of Nifty

What Affects the Stock Market in India?

The stock market is not just about the share prices and volumes; many things affect the stock market in India:

  • If we relate the market with economics, the market is affected by economic factors such as household consumption, wealth levels, consumer confidence, the capacity of the factories, business optimism, income of the rest of the world, and home currency rate.
  • Moreover, the interest rate and the money supply are additional factors that affect the GDP and thereby affect the money flow in the stock market.
  • Further elections and economic reforms play a vital role in India. The market is driven by the strength of the Governance and its policies. The market behaved accordingly in 1994, 2004, and 2014.
  • India is now seen as an emerging economy. Hence, international affairs and economic reforms also affect the Stock market in India.

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Conclusion

The stock market is driven by sentiments like how we behave in a given circumstance. The rise of the market post-COVID-19 is majorly due to an increase in business confidence in India and many things driving positively. You see many stocks breaking the all-time highs due to an increase in potential compared to before COVID-19.

FAQs

Who started the Indian stock market?

Mr. Premchand Roy Chand, known as the cotton king, started the stockbroking business in 1875.

What are the Indian Stock Market Timings?

The stock market opens at 9:15 AM and closes at 3:30 PM except on public holidays.

Which is the biggest stock exchange in India?

National Stock Exchange (NSE) is the biggest stock exchange in India.

When and how did the stock market begin?

The first stock market started in 1792 in New York at a corner of a road named Wall Street.

The Historical Evolution of the Indian Stock Market

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The Historical Evolution of the Indian Stock Market

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