BSE or The Bombay Stock Exchange is amongst the oldest stock exchanges in India. The exchange is located in Mumbai, on the Dalal Street. The BSE dates back its origin to 1875 and is the 7th largest stock exchange in the world on the basis of market capitalization.
BSE was the first recognized stock exchange of India. It was recognized by the Indian government on 31st August 1957. The market capitalization of BSE as of February 2021 is more than $2.8 trillion.
Let us take a detailed look into the history of the Bombay Stock Exchange and also understand it’s working.
History of the Bombay Stock Exchange
The BSE was established in Mumbai in the year 1875 as the Native Share and Stockbroker’s Association. In 1850s Traders and brokers used to gather under a Banyan Tree near Mumbai Town Hall. The number of brokers at that time was limited to only five. As the number increased, they kept on changing locations from Horniman Circle to Esplande Road and so on. Finally, it was the year 1874, when the association got a permanent location near the town hall and the group was registered as an official organization.
BSE operated from their town hall location till 1928. In 1928 the association acquired the present site, followed by the construction of a building. The construction was completed in the year 1930. The street on which the building was located was renamed as Dalal Street.
The Indian government recognized the BSE under the Securities Contracts Regulation Act in the year 1957. The present building was constructed in 1970s and was occupied by the stock exchange in the year 1980. The building was initially called BSE towers, but it was renamed in the memory of the BSE chairman Sir Phiroze Jamshedji Jeejeebhoy following his death.
Today there are nearly 6000 companies which are listed on the Bombay Stock Exchange making it one of the largest stock exchanges in the world. Some exchanges larger than BSE include New York Stock Exchange, NASDAQ, London Stock Exchange etc.
BSE is often credited with the title of creator of Indian Capital Markets, which helped the corporate sector to flourish in the country. The BSE is not only India’s, but Asia’s first stock exchange. The BSE also provides and equity trading platform for SME (Small and Medium Enterprise). BSE provides almost every capital market service including risk management, clearing and settlement.
Working of the Bombay Stock Exchange
BSE initially traded using an open outcry floor trading mechanism. Traders and brokers gathered on a floor, known as pit and use voice and hand signals to transfer information about the types of order. This mechanism is also known as floor trading or open floor system.
BSE worked using the floor trading system till 1995. In 1995, the exchange shifted to a modern electronic trading system which was fast, reliable, and more efficient and helped the exchange in eliminating various loopholes which were present in the earlier floor trading system.
Under this new electronic system, securities were traded in dematerialized form and there was no need for traders and brokers to gather around the exchange pit. The process was flawless and was widely accepted by traders and brokers. This new system was developed by CMC ltd. The exchange took only 50 days for migrating to this new system. This new screen based; automated trading platform was known as BOLT (BSE Online Trading). The system has a capacity of processing 8 million orders daily.
On 30th December 2016, BSE launched the India INX which is regarded as the first international exchange of India.
Major indices on the Bombay Stock Exchange
The Bombay Stock Exchange has various benchmark indices for tracing the performance. The most prominent one being the BSE Sensex. It is a free float market weighted index and includes 30 financially sound and well-established companies listed on the BSE. These companies represent various industrial sectors from the Indian economy. Sensex was initially known as S&P Bombay Stock Exchange Sensitive Index. It was first published on 1st January 1986.
Some of the other indices from the BSE include S&P BSE SmallCap, S&P BSE MidCap, S&P BSE LargeCap and BSE 500.
The activities on the BSE and other financial institutions on the Dalal Street are used as a figure of speech for representing the Indian economy. The BSE punches millions of orders daily from thousands of traders. It is regarded as one of the most sought-after platforms for investing in India. All you need is a Demat and Trading account with any SEBI registered broker to start trading. But before you trade don’t forget to have your risk profile evaluated from an investment advisor.
Happy Investing!
