Independence Day Special: Milestones Of Indian Stock Market In Past Seven Decades
As India celebrates its 76th Independence Day, it is also worth noting the significant milestones that have shaped the Indian stock market over the past seven decades.
These 7 milestones have played a crucial role in the growth and development of the Indian stock market, contributing to its current position as one of the fastest-growing stock markets in the world.
1956 – Securities Contract Regulation Act
In 1956, the Indian government passed the Securities Contract Regulation Act (commonly known as SCRA), which established the first set of rules and regulations and established the path for the development of the Indian capital markets. The regulatory authorities continue to update and abide by this Act even today.
1986 – Launch Of Sensex
On 1 January, 1986, the Stock Exchange Sensitive Index better known as Sensex, was launched, comprising 30 stocks that represent the top companies listed on the Bombay Stock Exchange. Sensex is the most commonly used barometer by analysts and retail investors to gauge the growth of the Indian Stock Market.
1987 - Introduction Of Investor Protection Fund
The IPF (Investor Protection Fund), which launched in 1987, is credited with sowing the seeds for Indian regulators' reputation as the most investor-protective in the world. The government created stringent standards to create a fund that will protect investors' interests and, in some cases, make up for any wrongdoing after realising that financial markets can be difficult and that individual investors may occasionally be treated unfairly.
1988 - Formation Of Sebi
In 1988, the Securities and Exchange Board of India (SEBI) was established as a non-statutory body with no statutory authority. In 1992, it was predicted that after the economy was liberalised, the capital markets would expand and would need a regulatory organisation with the authority to oversee and steer the markets in the correct direction. The Sebi Act was passed by the legislature to provide SEBI more authority to safeguard the interests of investors in securities, advance market growth, and enforce market regulations.
1992- FII Investment In India
Global businesses wishing to start operations in the largest democracy in the world now have more opportunities because to India's economic liberalisation. Global investors took a huge interest in the developing economy, and in 1992 the first foreign institution investment started.
1992 - Formation of National Stock Exchange
India had over 25 stock exchanges, most of which were regional, which led to price parity and loopholes and the realisation that investors couldn't engage in the stock market in a concentrated way. The National Stock Exchange, or NSE, was established with the goal of giving investors the much-needed transparency and creating a common stock exchange that was digital from the outset.
1995 – Electronic Trading System Instead Of Floor
In their quest to bring transparency and ease of investing, the old school trading system of brokers executing deals on the floor was abolished. With technological development, trading was initiated on computers with terminals provided to brokers. This was the first time when a common investor had direct access to stock prices without the involvement of a broker. It was the most radical step in creating the broad market and generating trust amongst investors.
1996 - Dematerialisation & Introduction Of Demat Account
The digitalisation of Sebi was complete with the introduction of Demat accounts and dematerialisation of shares. Prior to 1996, shares were held in physical form on a piece of paper with the shareholder’s name written on it. This led to fraud and the process of transferring the shares was cumbersome and took weeks before the shareholder actually received shares. SEBI ensured that all shares were transformed into digital format and held in Demat accounts, this enabled investors to participate more frequently in the stock market and also prevented misgivings.
2000 - Introduction of Equity Derivatives
One of the most notable developments in the history of Indian Capital Markets was the introduction of Equity Derivatives. Trading based on futures contracts at both NSE and BSE commenced based on the rules and by laws, and this provided essential economic functions to the industry. Derivatives enabled better risk management, price discovery and created much needed volume in the Indian Stock Market.
2006 – Sensex Crosses 10000
In June 2006, riding the buying wave into heavyweight stocks, Sensex moved up by 229 points and closed above 10000. The liberalisation journey that started in 1992 with Sensex reaching 3000 tripled in 14 years giving an annualised return of 9 per cent. In the next 14 years, Sensex would go on to deliver a CAGR of 11 per cent and growing FII interest and record high retail participation.
2023 – NSE Becomes Fourth Largest Stock Exchange
After 75 years of independence, India's financial markets are developed and home to all the major international investment institutions. The success can be attributed in large part to NSE, which was founded just 30 years ago. It is now the largest stock exchange in the world in terms of the volume of contracts traded. A major exchange in terms of market capitalisation. ranking third globally in terms of the volume of equity trading, and starting in January 2023, becoming the first exchange in the world to offer T+1 settlement.
Experts on the stock market feel that these 7 milestones have been instrumental in framing how they look today. Kush Gupta, Director, SKG Assets & Holdings says, “Indian stock market has come a long way since Independence. The journey has been riddled with moments of glory as well as times which exposed our nascent financial system and its loopholes. Today, NSE and BSE are one of the busiest exchanges in the world. While India’s growth story has a lot of milestones to highlight, we also witnessed how the landscape has evolved from and steps were taken to ensure that the Indian Stock Market reaches the masses and investors’ interests are protected.”
Sooraj Singh Gurjar, Founder and Managing Director, Get Together Finance says, “In February 2020, SENSEX hit one of its lowest lows by falling 1448 points in one day during the Covid times. Whereas, NIFTY dropped by 432 points in a day. Here, the frequency of the crash was directly proportional to its recovery rate. After the sudden crash, the Indian stock market witnessed one of its most rapid recoveries and this has been the case in the market in the last several decades too. The Indian markets have always bounced back.”
Suresh Mansharamani, founder of Tajurba, says, “From modest beginnings where savings found refuge in real estate, Physical Gold, and fixed deposits, India's investment landscape has evolved significantly post-independence. The winds of liberalisation, privatisation, and globalisation reshaped this terrain, introducing avenues like mutual funds and PMS, channelling savings into regulated and formalised financial markets.” He adds, “As India commemorates 75 years of Independence, our stock market's trajectory mirrors the nation's journey — marked by growth, evolution, and dynamic change. From the establishment of BSE in 1875 to NSE's launch and foreign institutional investor entry in 1992, these milestones echo the relentless spirit of entrepreneurs and investors shaping India's economic course.”
Basesh Gala, Business Mentor and Investor, says, “This Independence Day, reflecting upon India's stock market journey evokes a sense of nostalgia and pride. From BSE's value in 1990 with a modest value of around 1000, to reaching 10,000 in 2006, and now standing resiliently at approximately 65,000 in 2023, the trajectory has been nothing short of phenomenal. The period from 1984 to 2021 witnessed an average growth of around 20%, showing India's robust economic resilience post-COVID. Amidst a global landscape where nations face uncertainties, India emerges as a beacon of stability and growth, its stock market poised to surge at an anticipated rate of 15 per cent annually. Bolstered by strong leadership and political stability, India beckons investors worldwide. The convergence of factors places India at the forefront of economic expansion, with projections of reaching the remarkable milestone of one lakh (1,00,000) by 2026.”
