DEVELOPMENT OF THE STOCK MARKET IN INDIA

The stock market originated in India at the end of the eighteenth century when lots of new negotiable instruments were introduced. However, the real beginning was made in the middle of nineteenth century when Companies Act, 1860 was enacted where the concept of limited liability was introduced. 

The Bombay Stock Exchange was formed in 1875. This was followed by formation of exchanges in Ahmedabad in 1894, Calcutta (Kolkata) in 1908, and Madras (now Chennai) in 1937. Calcutta Stock Exchange (CSE) was the largest stock exchange in India till 1960’s. In 1961, there were 1203 listed companies. Of these, 576 were listed on the CSE and 297 on the BSE. However, the latter part 1960’s saw significant decline in the share of CSE. But, the share of BSE gained during that period.

Pattern of Growth of Stock Exchanges
	1946	1961	1971	1975	1980
No of Stock exchanges	7	7	8	8	9
No of listed Companies	1175	1203	1599	1852	2265
Market Capitalizatio ( ` in crores)	971	1292	2675	3273	6750
	1990-91	1999-2000	2004-05	2007-08	2012-13
No of Stock Exchange	22	23	23	21	26
No of listed Companies	2471	5815	4731	4887	5133
Market Capitalisation	90,836	11,2,842	1,698,428	5,138,014	6,214,941
Turnover( ` in crores)	36,011	20,670,310	1,620,498	5,129,895	3,478,391

Till 1990’s, the Indian Stock Market was suffering from many drawbacks which are enumerated as below: 

•  Uncertainty of execution prices.
• Uncertain delivery and settlement periods.
•   Lack of transparency.
•  High transaction costs.
•  Absence of risk management.
•   Systematic failure of market due to market failure.
•  Partiality of brokers to certain client only. 
• Market Reforms after 1991 
• After the initiation of reforms in 1991, the secondary market has adopted the following system: 
•  Regional stock exchanges 
•  The National Stock Exchanges (BSE and NSE) 
• The Over the Counter Exchange of India (OTCEI) 
• The Interconnected Stock Exchange of India (ISE) 
• The NSE was set up in 1994. It was the first stock exchange in India to bring new technology, new trading practices, new institutions and new products. The OTCEI was established in 1992 providing small and medium sized enterprises the means to generate capital. Metropolitan Stock Exchange of India Ltd. (MSEI), formerly known as MCX Stock Exchange Ltd. (MCX-SX), is recognized by country’s securities market regulator - Securities and Exchange Board of India (SEBI). It offers an electronic platform for trading in Capital Market, Futures & Options, Currency Derivatives, Interest Rate Futures (IRF) and Debt Market segments.MSEI's current shareholders include Indian public sector banks, private sector banks, investors and domestic financial institutions.