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Indian stock market is one of the oldest and fastest growing financial markets in the world and considered to the best among the markets of the emerging economies. The history of Indian stock markets dates back 200 years toward the end of the 18th century when India was under the spell of the East India Company. The development of the capital market in India concentrated around Mumbai where no less than 200 to 250 stockbrokers were active during the second half of the 19th century.
The growth of the various stock exchanges in India was more due to local demand-pulls than anything else and consequently the stock exchanges of Mumbai, Ahmedabad and Kolkata were established by the end of the 19th century. By the early 1960s the total number of stock exchanges in India rose to eight that included Mumbai, Ahmedabad and Kolkata apart from Madras, Kanpur, Delhi, Bangalore and Pune. Today there are 21 regional stock exchanges in India in addition to the centralized NSE (National stock Exchange) and OTCEI (Over the Counter Exchange of India).
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stock markets in India remained stagnant due to the controlled nature of the economy up to the early 1990s when the Indian economy began ‘liberalizing’. As the controls began to be dismantled or eased out, the stock markets witnessed a flurry of IPOs hitting the market. This resulted in many new companies across different industry segments to come up with newer products and services.
One of the striking features of the growth of the Indian economy in recent years has been the role played by its stock markets in assisting and fuelling that growth. Much of the organized sector in India has been affected by high growth and the stock markets played an all-inclusive role in sustaining that growth. Many PSUs (Public Sector Undertakings) that decided to offload part of their equity were also helped by the well-organized stock market in India.
During the mid 1990s the government of India launched the NSE (National Stock Exchange) and the OTCEI (Over the Counter Exchange of India) to usher in an easier and more transparent form of trading in stocks. While the NSE has not just done well to grow and evolve into the virtual ‘backbone’ of capital markets in India the OTCEI struggled and is yet to show any sign of growth and development. The integration of IT into the capital market infrastructure has been particularly smooth in India due to the country’s world class IT industry and this has pushed up the operational efficiency of the Indian stock market to global standards. As a result the country has been able to capitalize on its high growth and attract foreign capital like never before.
The SEBI (Securities and Exchange Board of India) is the regulating authority for capital markets in India. SEBI came into prominence in the 1990s after the capital markets experienced some turbulence and has grown in strength as one of the country’s most important institutions.