Bombay Stock Exchange Explained

BSE Limited
Type:	Stock exchange
City:	Mumbai, Maharashtra
Foundation:	^[1]
Currency:	Indian rupee
Listings:	5,453^[2]
Mcap:	(July 2024)^[3]
Homepage:	bseindia.com
Module:	Embed: yes
Coordinates:	18.9297°N 72.8336°W

BSE Limited, also known as the Bombay Stock Exchange (BSE), is an Indian stock exchange which is located on Dalal Street, known as the Wall Street of Mumbai,^[4] in turn described as the New York of India.^[5] Established in 1875 by cotton merchant Premchand Roychand,^[6] it is the oldest stock exchange in Asia,^[7] and also the tenth oldest in the world.^[8] The BSE is the world's 7th largest stock exchange with a market capitalization exceeding US$5 trillion as of May 2024.^[9]

History

Bombay Stock Exchange was founded by Premchand Roychand in 1875.^[10] While BSE Limited is now synonymous with Dalal Street, it was not always so. In the 1850s, four Gujarati and one Parsi stockbroker gathered together under a Banyan tree in front of Bombay (now Mumbai) Town Hall, where Horniman Circle is now situated.^[11] A decade later, the brokers moved their location to under the banyan trees at the junction of Meadows Street and what was then called Esplanade Road, now Mahatma Gandhi Road. With a rapid increase in the number of brokers, they had to shift places repeatedly. At last, in 1874, the brokers found a permanent location, the one that they could call their own. The brokers group became an official organization known as "The Native Share & Stock Brokers Association" in 1875.^[12]

On 12 March 1993, a car bomb exploded in the basement of the building during the 1993 Bombay bombings.^[13] The BSE is also a Partner Exchange of the United Nations Sustainable Stock Exchange initiative, joining in September 2012.^[14] BSE established India INX on 30 December 2016. India INX is the first international exchange of India.^[15] BSE became the first stock exchange in the country to launch commodity derivatives contract in gold and silver in October 2018.^[16]

BSE was demutualized and corporatized on 19 May 2007, pursuant to the BSE (Corporatization and Demutualization) Scheme, 2005 notified by SEBI.^{[17] [18]} It was listed on NSE on 3 February 2017.^{[19] [20]}

Market statistics

• The Bimal Jalan Committee report estimated that barely 3% of India's population invested in the stock market, as compared to 27% in the United States and 10% in China.^{[21] [22] [23] [24]}
• The Economic Times estimated that as of April 2018, 6 crore (60 million) retail investors had invested their savings in stocks in India, either through direct purchases of equities or through mutual funds.^[25]
• The total market capitalization of Bombay Stock Exchange hits the mark of 400 lakh crores.^[26]
• Morgan Stanley has noted that the Indian stocks have been through four bear markets in 25 years, or since foreign investors became actively involved with Indian equities.^[27] The Economic Times estimate that the Indian stock market sees a bear market on average once every 3 years, similar to the US market. It uses the Nifty 50 index as a reference point and identifies eight 20% drops in the last 25 years.^[28]
• According to SEBI, during FY 2022–23, 73% of mutual fund units were redeemed within 2 years of investment. Only investments in 3% of the units continued for more than 5 years.^{[29] [30]}
• Another study conducted by the SEBI, approximately 89% of individual stock traders in the equity Futures & Options (F&O) segment incurred losses during the financial year 2021-22.^{[31] [32] [33]}
• According to a Reserve Bank of India report, mutual funds attracted 6% of household savings in FY2023 and less than 1% went into direct equities.^{[34] [35] [36]} Almost 95% of household savings in India are held in bank deposits, including fixed deposit, provident fund, PPF, life insurance, and various small savings schemes.
• Maharashtra accounts for the most number of investors. More than 15 million or 21 percent of registered investors with the BSE are from the state, followed by Gujarat (8.6 million), Uttar Pradesh (5.3 million), Tamil Nadu (4.3 million) and Karnataka (4.2 million). These five states account for more than half or 53 percent of all the registered investors.^{[37] [38]}

Criticism and controversies

The Indian stock exchanges BSE and NSE have witnessed several high-profile corruption scandals.^{[39] [40] [41] [42] [43]} At times, the Securities and Exchange Board of India (SEBI) has barred several individuals and entities from trading on the exchanges for insider trading, stock manipulation, especially in illiquid mid-caps, small-caps and penny stocks.^{[44] [45] [46] [47]}

Market operators illegal activity

Market operators continue to operate in the Indian stock market, albeit within a regulatory framework aimed at ensuring transparency and fairness. Market operators are individuals or entities that actively engage in buying and selling securities to influence their prices for profit. They operate through various strategies, such as arbitrage, short selling, high-frequency trading, front running, churning, scalping, wash trading, spoofing, and layering, often leveraging sophisticated technology and large capital. Regulatory bodies like the Securities and Exchange Board of India (SEBI) oversee market activities to curb malpractices such as insider trading, price rigging, and market manipulation. SEBI has implemented measures, including surveillance systems, to detect and penalize unethical practices. Despite these regulations, market operators exploit loopholes to gain an edge, necessitating continuous vigilance and regulatory updates. Market operators in India often use the "pump and dump" strategy, despite strict regulations against such practices. The "pump and dump" scheme involves artificially inflating the price of a stock (pump) through false or misleading positive statements. Once the price has been significantly raised, the operators then sell off their holdings (dump) at the inflated prices, leading to a sharp price decline and substantial losses for other investors who bought in at the higher prices. Their activities have continued to impact market volatility, liquidity, and price discovery, playing a significant role in the dynamics of the Indian stock market.Uppal, Jamshed Y., and Inayat U. Mangla. “Market Volatility, Manipulation, and Regulatory Response: A Comparative Study of Bombay and Karachi Stock Markets.” The Pakistan Development Review, vol. 45, no. 4, 2006, pp. 1071–83. . Retrieved 30 May 2024.^{[48] [49] [51]}

See also

• Economy of India
  • • Economy of Maharashtra List of stock exchanges National Stock Exchange of India
      • • • • • • • • • NSE co-location scam Stock market crashes in India List of stock market crashes and bear markets Mutual funds in India Market manipulation Risk management Financial risk management Insider trading Trading day Muhurat trading Clause 49 Securities and Exchange Board of India

References

Citations

Further reading

• Book: BSE: Journey of an Aspiring Nation. Kochhar, S.. 978-8-1929-1725-2. 2015. Skoch Media.
• Book: Efficiency of BSE Sectoral Indices in India: A Study with Special Reference to Bombay Stock Exchange Ltd in India. Ramkumar, R.R. and Selvam, M.. 978-3-6592-1130-0. 2014. Lap Lambert Academic Publishing GmbH KG.
• Book: Stock Market Volatility in India. Kaur, H.. 978-8-1762-9361-7. 2002. Deep & Deep Publications .
• Book: The Scam: Who Won, who Lost, who Got Away. Basu, D. and Dalal, S.. 978-8-1859-4410-4. 93902443. 1993. UBS Publishers' Distributors.
• Book: Indian Stock Market: An Empirical Analysis of Informational Efficiency. Hiremath, G.S.. 978-8-1322-1590-5. 2013946889. 2013. Springer India.
• Book: Rethinking the BSE Crisis: A Study of Scientific Reasoning under Uncertainty. Cummings, L.. 978-9-4017-8491-7. 2014. Springer Netherlands .
• Razdan, A. Scaling in the bombay stock exchange index. Pramana - J Phys 58, 537–544 (2002).
• Goel, A., Tripathi, V. and Agarwal, M. (2021), "Market microstructure: a comparative study of Bombay stock exchange and national stock exchange", Journal of Advances in Management Research, Vol. 18 No. 3, pp. 414-442.
• Krishnamurti, Chandrasekhar and Eleswarapu, Venkat R., Liquidity, Stock Returns and Ownership Structure - An Empirical Study of the Bombay Stock Exchange (March 31, 1994). IIM Bangalore Research Paper No. 65, Available at or
• Sumon Kumar Bhaumik. “Stock Index Futures in India: Does the Market Justify Its Use?” Economic and Political Weekly, vol. 32, no. 41, 1997, pp. 2608–11. . Retrieved 13 Feb. 2024.
• Ganeshaiah, K. N. “Has the Behaviour of the Stock Market Been Affected by the Scam? — A Statistical Analysis.” Current Science, vol. 63, no. 7, 1992, pp. 345–47. . Retrieved 13 Feb. 2024.
• Book: Bulls, Bears and Other Beasts (5th Anniversary Edition): A Story of the Indian Stock Market. Nair, S.. 978-9-3907-4257-8. 2021. Pan Macmillan.

Notes and References

1. Web site: India. BSE. Corporate profile. 8 August 2020. 25 September 2021. https://web.archive.org/web/20210925041127/https://www.bseindia.com/downloads/Corporate_Profile.pdf. live.
2. Web site: All India Market Capitalization BSE Listed stocks Market Capitalization . BSE . 18 August 2024.
3. Web site: Mcap of BSE-listed companies jumps to lifetime peak of Rs 462.38 lakh cr . . 31 July 2024 . 30 July 2024 . https://www.livemint.com/market/stock-market-news/bse-mcap-surges-to-an-all-time-high-of-5-5-trillion-for-the-first-time-investor-base-touches-18-4-crore-mark/amp-11722322567452.html . live .
4. Web site: What Is Dalal Street?. James Chen. Dotdash Meredith.
5. Web site: Mumbai Is India's New York. 18 February 2024. NPR.
6. Web site: BSE-Introduction. bseindia.com. 31 January 2018. https://web.archive.org/web/20180131201340/http://www.bseindia.com/static/about/introduction.aspx?expandable=0. 31 January 2018. dead.
7. Book: Priya Rawal. Indian Stock Market and Investors Strategy. 16 April 2015. Priya Rawal. 978-1-5053-5668-7. 12–. 23 November 2018. 11 January 2023. https://web.archive.org/web/20230111193659/https://books.google.com/books?id=xLsoCAAAQBAJ&pg=PA12. live.
8. Web site: 10 Oldest Stock Exchanges in the World. https://web.archive.org/web/20210304212435/https://www.oldest.org/technology/stock-exchanges/. 4 March 2021. 10 September 2020. live .
9. Web site: Monthly Reports - World Federation of Exchanges. WFE. 21 May 2018. 11 January 2023. https://web.archive.org/web/20230111193701/https://www.world-exchanges.org/our-work/statistics. live.
10. News: BSE may set another record, become an official tourist spot . 4 November 2021 . . . 6 October 2017 . 4 November 2021 . https://web.archive.org/web/20211104151832/https://www.newindianexpress.com/cities/mumbai/2017/oct/06/bse-may-set-another-record-become-an-official-tourist-spot-1667426.html . live .
11. Web site: The Profile of the Bombay Stock Exchange Limited.
12. Web site: The History of Bombay Stock Exchange . 11 September 2014 . . https://ghostarchive.org/varchive/youtube/20211030/oDkiJcRWvRQ. 2021-10-30.
13. News: The 1993 Mumbai Blasts: What Exactly Happened on March 12 That Year. News18. 16 October 2017. 16 October 2017. https://web.archive.org/web/20171016230012/http://www.news18.com/news/india/the-1993-mumbai-blasts-what-exactly-happened-on-march-12-that-year-598045.html. live.
14. Web site: Bombay Stock Exchange (BSE) commits to promoting sustainability. UNCTAD. 28 September 2012 . 2016-04-29. 2 April 2015. https://web.archive.org/web/20150402104057/http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=310&Sitemap_x0020_Taxonomy=ISAR%20-%20Corporate%20Transparency%20-%20Accounting;#6;. live.
15. Web site: India INX. indiainx.com. 15 March 2018. 18 October 2018. https://web.archive.org/web/20181018051133/http://www.indiainx.com/static/about.aspx. live.
16. Web site: India thehindubusinessline. Business Line. October 2018 . 25 October 2018. 27 July 2020. https://web.archive.org/web/20200727013230/https://www.thehindubusinessline.com/markets/bse-launches-commodity-derivative-contracts-in-gold-silver/article25095987.ece. live.
17. News: BSE demutualisation complete . Business Standard India . 27 November 2022 . 14 June 2013 . 27 November 2022 . https://web.archive.org/web/20221127070222/https://www.business-standard.com/article/markets/bse-demutualisation-complete-107051901004_1.html . live .
18. Web site: Order in respect of BSE (Corporatisation and Demutualisation) Scheme, 2005 . sebi.gov.in . 27 November 2022 . 27 November 2022 . https://web.archive.org/web/20221127070229/https://www.sebi.gov.in/enforcement/orders/may-2005/order-in-respect-of-bse-corporatisation-and-demutualisation-scheme-2005_10748.html . live .
19. Web site: BSE to list on NSE on 3 February . Livemint . 27 November 2022 . 29 January 2017 . 27 November 2022 . https://web.archive.org/web/20221127070222/https://www.livemint.com/Money/YkU9l96zXEAC2FiRGXZpYJ/BSE-to-list-on-NSE-on-3-February.html . live .
20. Web site: Manu Balachandran . 142 years after taking roots under a banyan, Asia's oldest stock exchange hits the capital market today . Quartz. 27 November 2022 . 22 January 2017 . 27 November 2022 . https://web.archive.org/web/20221127070222/https://qz.com/india/886214/bse-ipo-142-years-after-taking-roots-under-a-banyan-asias-oldest-stock-exchange-hits-the-capital-market-today . live .
21. News: Increasing retail investor base: SEBI has a tough job ahead. 24 April 2018. Moneylife. 2 June 2011.
22. Book: Jalan. Bimal. Jalan Committee report 2010 – Review of Ownership andGovernance of Market Infrastructure Institutions. 1 November 2010. SEBI. Mumbai. 24 April 2018.
23. Book: Chandrasekhar. C.P.. Mallick. Sarat. A. Akriti. The elusive retail investor: How deep can (and should) India's stock markets be?. SEBI. 24 April 2018.
24. Book: Library of Congress. Federal Research Division. FINANCIAL LITERACY AMONG RETAIL INVESTORS IN THE UNITED STATES. 30 December 2011. SEC / The library of congress. Washington DC. 24 April 2018.
25. News: Thukral. Arun. For those who do not make much money in stocks, here's the catch. 24 April 2018. The Economic Times. 24 April 2018.
26. https://www.hindustantimes.com/business/bse-all-listed-firms-market-cap-hits-rs-400-lakh-crore-a-first-top-points-101712550815127.html
27. Web site: 2020-03-25 . India faced 4 bear markets in 25 years; why this one is different . 2024-01-26 . CNBCTV18 . en.
28. Web site: Bhasin . Tinesh . 2022-12-29 . Best Investment Strategies To Survive in a Bear Market . 2024-01-26 . Learn About Investment Tax Saving, and Financial Planning. . en-US.
29. Web site: SEBI | Annual Report 2021-22. sebi.gov.in.
30. News: 50% mutual funds get redeemed within a year. Is long-term investing dead?. Nikhil. Agarwal. The Economic Times . 24 May 2023.
31. Web site: SEBI | Study - Analysis of Profit and Loss of Individual Traders dealing in Equity F&O Segment. sebi.gov.in.
32. News: Sebi study suggests 89% retail traders in equity F&O suffered losses in FY22. The Economic Times . 25 January 2023.
33. News: 9 in 10 derivative traders lose money: Sebi study. The Times of India . 26 January 2023.
34. Web site: Reserve Bank of India - RBI Bulletin . 2024-03-04 . rbi.org.in.
35. Web site: Mutual funds attract 6% of household savings in FY23, shows RBI data . 2024-08-07.
36. Web site: Reserve Bank of India - Household Financial Savings . 2024-03-04 . rbi.org.in.
37. News: Vardhan . Pratap . 2022-09-08 . Data Which Indian State has the most number of stock market investors . 2024-01-26 . The Hindu . en-IN . 0971-751X.
38. Web site: 2021-06-07 . These 10 states account for nearly 80% of retail investors . 2024-01-26 . Moneycontrol . en.
39. News: How India's trading queen and mystery guru engulfed NSE in scandal . The Economic Times .
40. News: The fall of NSE: Corruption or hubris? . The Economic Times . Rangan . MC Govardhana .
41. News: BSE Sensex drops as corruption scandal weighs . Reuters . 25 November 2010 .
42. Web site: SEBI penalises BSE, NSE for 'laxity' in Karvy fraud case . 13 April 2022 .
43. News: Trading 'queen' and mystery guru: Strange tale engulfs NSE in scandal . Business Standard India . 21 March 2022 .
44. Web site: Sreedhar . Vidya . Rs 144 crore wrongful profit! Sebi finds stock manipulation in 5 smallcaps . The Economic Times . 24 August 2023 . 21 June 2023.
45. News: Sebi ban pinches penny stocks . 24 August 2023 . Business Standard.
46. News: SEBI Cracks Down on Misuse of Penny Stocks . 24 August 2023 . The Wire.
47. News: I-T Department, SEBI begin crackdown on penny stock firms in PMO-led push . 24 August 2023 . Moneycontrol . 20 November 2017 . en.
48. Goel, A., Tripathi, V. and Agarwal, M. (2021), "Market microstructure: a comparative study of Bombay stock exchange and national stock exchange", Journal of Advances in Management Research, Vol. 18 No. 3, pp. 414-442.
49. Testing the market efficiency in Indian stock market: Evidence from Bombay Stock Exchange broad market indices . 10.1108/JEFAS-04-2021-0040 . 2022 . Elangovan . Rajesh . Irudayasamy . Francis Gnanasekar . Parayitam . Satyanarayana . Journal of Economics, Finance and Administrative Science . 27 . 54 . 313–327 . 10419/289641 . free .
50. https://www.researchgate.net/profile/Chakrapani-Chaturvedula/publication/311446941_The_Effectiveness_of_Trade_for_Trade_Segment_as_a_Surveillance_Effort_to_Prevent_Price_Manipulation_Evidence_from_India/links/58f7a2094585158d8a6c176e/The-Effectiveness-of-Trade-for-Trade-Segment-as-a-Surveillance-Effort-to-Prevent-Price-Manipulation-Evidence-from-India.pdf ^[49]
51. Prabu, A.E., Bhattacharyya, I. & Ray, P. Impact of monetary policy on the Indian stock market: Does the devil lie in the detail?. Ind. Econ. Rev. 55, 27–50 (2020).