BSE: Found pillar of India’s financial system

MUMBAI, India: Founded in 1875 by ambitious cotton merchant Premchand Roychand, the Bombay Stock Exchange (BSE) is pillar of India’s financial system. Often referred to as Mumbai’s Wall Street, Dalal Street is home to BSE, one of the most important stock exchanges worldwide with a market capitalization of around $5 trillion as of May 2020. This paper explores the rich history, present dynamics, and future possibilities of BSE therefore offering a whole picture of its influence on the financial scene of India.

Archaeological Development

Beginning their adventure in the middle of the 19th century, five stock brokers started trading under a banyan tree in front of Mumbai Town Hall, now Horniman Circle. This unofficial meeting of brokers represented the early years of what would become the oldest stock exchange in Asia. The growing number of brokers by 1874 required a permanent site, thus Dalal Street became their home. They registered formally in 1875 under “The Native Share & Stock Brokers Association.”

BSE has changed dramatically over decades. It developed India INX, the nation’s first foreign exchange, in 2016, joined the United Nations Sustainable Stock Exchange project in 2012, and in 2018 it unveiled gold and silver commodities derivatives contracts. These benchmarks underline BSE’s dedication to creativity and adaptation in a fast changing financial scene.

Dynamics and Market Statistics

Though historically and economically important, the Indian stock market—including BSE—has suffered with low direct involvement from the public people. Comparatively to 27% in the United States and 10% in China, just roughly 3% of India’s population participates in the stock market according a report by the Bimal Jalan Committee. But according to a 2018 The Economic Times analysis, direct equities or mutual funds allow almost 60 million regular investors in India to participate in the stock market.

With nearly 21% of BSE investors coming from Maharashtra, the state tops the nation in registered investors. Together accounted for more than half of all registered investors are Gujarat, Uttar Pradesh, Tamil Nadu, and Karnataka.

Legal Obstacles and Market Agents

Over the years, BSE and the larger Indian stock market have confronted many regulatory obstacles. Its past has been tarnished by well-publicized scandals including the 1992 Harshad Mehta fraud and the NSE co-location scam. Multiple times intervention by the Securities and Exchange Board of India (SEBI) has been necessary to handle problems of insider trading, stock manipulation, and other unethical behavior.

Market operators still provide difficulties since they buy and sell securities to affect prices for profit. To take advantage of market inefficiencies, these operators use techniques including arbitrage, short selling, and high-frequency trading. Though SEBI makes great attempts to guarantee fairness and openness, these operators usually discover means to get around rules.

One common problem is the “pump and dump” strategy, in which operators purposefully raise the price of a stock by false claims and subsequently sell off their shares at the highest point, therefore resulting in large losses for other investors. This habit still affects market volatility and liquidity, which calls for ongoing regulatory alertness.

Effect and Future Vision

The financial market of India is significantly influenced by BSE. For trading, investment, and capital raising, it provides a vital forum. The exchange’s constant innovation—launching commodities derivatives and India INX—reflects its will to shift with the global financial scene.

Still, the necessity of stronger regulations and more investor education is clear. The sustainable development of BSE and the larger Indian stock market depends on higher direct involvement from the Indian population and guarantees of ethical market practices.