India’s share market in 75 years of Independence: Milestones in transformation of stock market

India is all set to celebrate the 75th year of Independence on Monday. India has come a long way since its independence from British rule, and so have the country’s stock markets. The stock market trading in India began in the year 1855. Bombay Stock Exchange, now known as BSE, the first ever stock exchange in Asia was established in 1875. The Government of India officially recognised BSE under the Securities Contract Regulation Act in 1957. It may be noted that India’s most valuable company, in terms of market capitalisation, went public in the 1970s. Here are major milestones in the transformation of Indian stock markets since Independence.

Also read: 75 years of Independence: Sensex from 100 to 59000, gauge for an undervalued stock called India

The Reserve Bank of India (RBI) along with the Government of India formed Unit Trust of India (UTI), the first mutual fund of India in 1963. In 1987, SBI Mutual Fund came into existence which was the first non-UTI mutual fund in India. In 1993, the first Mutual Fund Regulations came into existence, under which all mutual funds, except UTI were to be registered and governed.

1977: Reliance Industries IPO – The most awaited IPO

Reliance Industries, now the largest listed company in India by market capitalisation of Rs 17.5 lakh crore, came up with an initial public offering (IPO) in the year 1977. Controlled by Dhirubhai Ambani then, Reliance Industries was known as Reliance Textiles Industries Ltd. The issue was oversubscribed by seven times. Reliance had issued 2.8 million equity shares of Rs 10 each in its first equity sale to the 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, the Reliance Industries stock rose to Rs 2,855 apiece.

1986: The birth of BSE Sensex

S&P BSE Sensex, created in 1986, was calculated on a “Market Capitalisation – Weighted” methodology of 30 component stocks across key sectors. The base year of S&P BSE Sensex was taken as 1978-79. Since 1 September 2003, the 30-share barometer has been calculated on a free-float market capitalisation methodology. Major index providers like MSCI, FTSE, STOXX, and Dow Jones use the free-float methodology. The Sensex is also considered by many as the barometer of India’s corporate progress, a measure of the impact of the economic progress on India’s corporate sector. The top ten companies by weight on the Sensex now are 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 biggest stock market operators on Dalal Street. Harshad Mehta was charged with numerous financial crimes that took place in the Securities Scam of 1992 worth over Rs 4,500 crore. He was involved in a massive stock manipulation scheme, and his firm brokered transactions between banks. After the Harshad Mehta scam was reported, the stock market crashed and BSE remained closed for a month.

1992: National Stock Exchange

The National Stock Exchange (NSE) was incorporated in 1992, and was recognised as a stock exchange by the capital market regulator SEBI (Securities & Exchange Board of India) in April 1993. NSE commenced operations in 1994 with the launch of the debt market, and cash market segment. In 1996 the exchange commenced the trading and settlement in dematerialised securities. In the same year, NSE launched Nifty 50 Index, a broader benchmark index as 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 listed 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 listed 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 first allowed to invest in the Indian stock markets. India became an attractive destination for the foreign investors after the historic economic liberalisation. Since then, India’s stock markets have largely been fueled by foreign institutional investors.

2021-2022: LIC, Paytm – Two biggest IPOs so far

LIC’s Rs 21,000-crore public issue is the largest ever witnessed by Dalal Street in May this year. The issue had garnered a strong response from all investor categories on a massive six-day subscription window, unlike the usual three-day window. Paytm’s Rs 18,300 crore IPO is the second biggest public issue so far.