Bombay Stock Exchange

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Image:Bombay-Stock-Exchange.jpg The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia. It is located at Dalal Street, Mumbai, India.

Bombay Stock Exchange was established in 1875. There are around 3,500 Indian companies listed with the stock exchange, and has a significant trading volume. As of October2006, the market capitalization of the BSE was about Rs. 33.4 trillion (US $ 730 billion). The BSE SENSEX (SENSitive indEX), also called the BSE 30, is a widely used market index in India and Asia. As of 2005, it is among the 5 biggest stock exchanges in the world in terms of transactions volume.

1 History
2 BSE Sensex
3 BSE - other Indices
4 External links

[edit] History

An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hall of Bombay from the mid-1850s, each investing a (then) princely amount of Rupee 1. This banyan tree still stands in the Horniman Circle Park, Mumbai. The informal group of stockbrokers organized themselves as the The Native Share and Stockbrokers Association which, in 1875, was formally organized as the Bombay Stock Exchange (BSE).

In January 1899, the stock exchange moved into the Brokers’ Hall after it was inaugurated by James M Maclean. After the First World War, the BSE was shifted to an old building near the Town Hall. In 1928, the plot of land on which the BSE building now stands (at the intersection of Dalal Street, Bombay Samachar Marg and Hammam Street in downtown Mumbai) was acquired, and a building was constructed and occupied in 1930.

Premchand Roychand was a leading stockbroker of that time, and he assisted in setting out traditions, conventions, and procedures for the trading of stocks at Bombay Stock Exchange and they are still being followed.

Several stock broking firms in Mumbai were family run enterprises, and were named after the heads of the family. The following is the list of some of the initial members of the exchange, and who are still running their respective business.

D.S. Prabhudas & Company (now known as DSP, and a joint venture partner with Merrill Lynch)
Jamnadas Morarjee (now known as JM)
Champaklal Devidas (now called Cifco Finance)
Brijmohan Laxminarayan

In 1956, the Government of India recognized the Bombay Stock Exchange as the first stock exchange in the country under the Securities Contracts (Regulation) Act.

The BSE moved into its current premises - the Phiroze Jeejeebhoy Towers - in 1980. The Bombay Stock Exchange followed the familiar outcry system for stock trading up until 1995, when it was replaced by an electronic (eTrading) system named BOLT, or the BSE OnLine Trading system. In 2005, the status of the exchange changed from an Association of Persons (AoP) to a full fledged corporation under the BSE (Corporatization and Demutualization) Scheme, 2005 (and its name was changed to The Bombay Stock Exchange Limited).

The most decisive period in the history of the BSE took place after 1992. In the aftermath of a major scandal with market manipulation involving a BSE member named Harshad Mehta, BSE responded to calls for reform with intransigence. The foot-dragging by the BSE helped radicalise the position of the government, which encouraged the creation of the National Stock Exchange (NSE), which created an electronic marketplace. NSE started trading on 4 November 1994. Within less than a year, NSE turnover exceeded the BSE. BSE rapidly automated, but it never caught up with NSE spot market turnover. The second strategic failure at BSE came in the following two years. NSE embarked on the launch of equity derivatives trading. BSE responded by political effort, with a friendly SEBI chairman (D. R. Mehta) aimed at blocking equity derivatives trading. The BSE and D. R. Mehta succeeded in delaying the onset of equity derivatives trading by roughly five years. But this trading, and the accompanying shift of the spot market to rolling settlement, did come along in 2000 and 2001 - helped by another major scandal at BSE involving the then President Mr. Anand Rathi. NSE scored nearly 100% market share in the runaway success of equity derivatives trading, thus consigning BSE into clearly second place. Today, NSE has roughly 66% of equity spot turnover and roughly 100% of equity derivatives turnover.

[edit] BSE Sensex

Main article: BSE Sensex

The BSE SENSEX (also known as the BSE 30) is a value-weighted index composed of 30 scrips, with the base April 1979 = 100. The set of companies which make up the index has been changed only a few times in the last 20 years. These companies account for around one-fifth of the market capitalization of the BSE.