Evolution
Indian Stock Markets are one
of the oldest in Asia. Its history dates back to nearly 200
years ago. The East India Company was the dominant institution
in those days and business in its loan securities used to
be transacted towards the close of the eighteenth century.
By 1830's business
on corporate stocks and shares in Bank and Cotton presses
took place in Bombay. Though the trading list was broader
in 1839, there were only half a dozen brokers recognized by
banks and merchants during 1840 and 1850.
The 1850's witnessed
a rapid development of commercial enterprise and brokerage
business attracted many men into the field and by 1860 the
number of brokers increased into 60.
In 1860-61 the American
Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun.
The number of brokers increased to about 200 to 250. However,
at the end of the American Civil War, in 1865, a disastrous
slump began (for example, Bank of Bombay Share which had touched
Rs. 2850 could only be sold at Rs. 87).
At the end of the
American Civil War, the brokers who thrived out of Civil War
in 1874, found a place in a street (now appropriately called
as Dalal Street) where they would conveniently assemble and
transact business. In 1887, they formally established in Bombay,
the "Native Share and Stock Brokers' Association"
(which is alternatively known as " The Stock Exchange
"). In 1895, the Stock Exchange acquired a premise in
the same street and it was inaugurated in 1899. Thus, the
Stock Exchange at Bombay was consolidated.
Other
leading cities in stock market operations
Ahmedabad gained importance next
to Bombay with respect to cotton textile industry. After 1880,
many mills originated from Ahmedabad and rapidly forged ahead.
As new mills were floated, the need for a Stock Exchange at
Ahmedabad was realised and in 1894 the brokers formed "The
Ahmedabad Share and Stock Brokers' Association".
What the cotton textile
industry was to Bombay and Ahmedabad, the jute industry was
to Calcutta. Also tea and coal industries were the other major
industrial groups in Calcutta. After the Share Mania in 1861-65,
in the 1870's there was a sharp boom in jute shares, which
was followed by a boom in tea shares in the 1880's and 1890's;
and a coal boom between 1904 and 1908. On June 1908, some
leading brokers formed "The Calcutta Stock Exchange Association".
In the beginning
of the twentieth century, the industrial revolution was on
the way in India with the Swadeshi Movement; and with the
inauguration of the Tata Iron and Steel Company Limited in
1907, an important stage in industrial advancement under Indian
enterprise was reached.
Indian cotton and
jute textiles, steel, sugar, paper and flourmills and all
companies generally enjoyed phenomenal prosperity, due to
the First World War.
In 1920, the then
demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The
Madras Stock Exchange" with 100 members. However, when
boom faded, the number of members stood reduced from 100 to
3, by 1923, and so it went out of existence.
In 1935, the stock market activity improved, especially in
South India where there was a rapid increase in the number
of textile mills and many plantation companies were floated.
In 1937, a stock exchange was once again organized in Madras
- Madras Stock Exchange Association (Pvt) Limited. (In 1957
the name was changed to Madras Stock Exchange Limited).
Lahore Stock
Exchange was formed in 1934 and it had a brief life.
It was merged with the Punjab Stock Exchange Limited, which
was incorporated in 1936.
Indian
Stock Exchanges - An Umbrella Growth
The Second World War broke out
in 1939. It gave a sharp boom, which was followed by a slump.
But, in 1943, the situation changed radically, when India
was fully mobilized as a supply base.
On account of the
restrictive controls on cotton, bullion, seeds and other commodities,
those dealing in them found in the stock market as the only
outlet for their activities. They were anxious to join the
trade and numerous others swelled their number. Many new associations
were constituted for the purpose and Stock Exchanges in all
parts of the country were floated.
The Uttar Pradesh
Stock Exchange Limited (1940), Nagpur Stock Exchange Limited
(1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.
In Delhi two stock
exchanges - Delhi Stock and Share Brokers' Association Limited
and the Delhi Stocks and Shares Exchange Limited - were floated
and later in June 1947, amalgamated into the Delhi Stock Exchange
Association Limited.
Post-independence
Scenario
Most of the exchanges suffered
almost a total eclipse during depression. Lahore Exchange
was closed during partition of the country and later migrated
to Delhi and merged with Delhi Stock Exchange.
Bangalore Stock Exchange
Limited was registered in 1957 and recognized in 1963.
Most of the other exchanges languished till 1957 when they
applied to the Central Government for recognition under the
Securities Contracts (Regulation) Act, 1956. Only Bombay,
Calcutta, Madras, Ahmedabad, Delhi, Hyderabad and Indore,
the well-established exchanges, were recognized under the
Act. Some of the members of the other Associations were required
to be admitted by the recognized stock exchanges on a confessional
basis, but acting on the principle of unitary control, all
these pseudo stock exchanges were refused recognition by the
Government of India and they thereupon ceased to function.
Thus, during early sixties there were eight recognized stock
exchanges in India (mentioned above). The number virtually
remained unchanged, for nearly two decades. During eighties,
however, many stock exchanges were established: Cochin Stock
Exchange (1980), Uttar Pradesh Stock Exchange Association
Limited (at Kanpur, 1982), and Pune Stock Exchange Limited
(1982), Ludhiana Stock Exchange Association Limited (1983),
Gauhati Stock Exchange Limited (1984), Kanara Stock Exchange
Limited (at Mangalore, 1985), Magadh Stock Exchange Association
(at Patna, 1986), Jaipur Stock Exchange Limited (1989), Bhubaneswar
Stock Exchange Association Limited (1989), Saurashtra Kutch
Stock Exchange Limited (at Rajkot, 1989), Vadodara Stock Exchange
Limited (at Baroda, 1990) and recently established exchanges
- Coimbatore and Meerut. Thus, at present, there are totally
twenty-one recognized stock exchanges in India excluding the
Over The Counter Exchange of India Limited (OTCEI) and the
National Stock Exchange of India Limited (NSEIL).
Since independence,
Indian stock markets have not only grown just in number of
exchanges, but also in number of listed companies and in capital
of listed companies. The remarkable growth after 1985 was
due to the favouring government policies towards security
market industry.
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