History of NSE: From Idea to Reality
Did you know that there are various stock exchanges in India, including BSE, NSE, CSE, India INX, MSE, MCX, NCDEX, and more? Beginning in 1992, NSE (The National Stock Exchange) has successfully secured its position as the largest stock exchange in India and the eleventh-largest in the world. Ashishkumar Chauhan, the CEO of NSE quoted, “Due to the use of mobile phones and applications, the numbers of traders are increasing everyday.”
Now National Stock Exchange has evolved into a sophisticated electronic market, ranking fourth for equity trading and offering seven capital market categories. But what’s the significant history of NSE that has taken it so far in terms of growth and evolution? Let’s dive deeper into the old books.
What is National Stock Exchange (NSE)
The National Stock Exchange (NSE) is the largest stock exchange in India. It is a platform that allows people to buy and sell financial stuff like stocks, bonds, and derivatives just like a shop. Established in Mumbai, Maharashtra, NSE began back in 1992 as the dematerialised online stock trading market. NSE is the first exchange to initiate screen-based or electronic trading and was introduced by insurance companies, leading banks, financial institutions and intermediates. Currently, the managing director and chief executive officer of the national stock exchange is Ashishkumar Chauhan.
NSE is a crucial body that allows companies to put their stocks up for sale, and people trade them. NSE is one of the two main stock markets in India, with the other one being the Bombay Stock Exchange (BSE). It is a big part of the country’s economy and shows how the Indian financial market is consistently growing. Working as an authorized regulator for investors, NSE has emerged into a multi-faceted organization.
The key broad market indices listed on NSE are Nifty 50, Nifty Next 50, Nifty 100, Nifty 200, Nifty 500, Nifty Midcap 50, Nifty Smallcap 100, etc. The major sectoral indices of NSE are Nifty Bank, Nifty Auto, Nifty FMCG, Nifty IT, Nifty Pharma, Nifty PSU bank, etc.
The Birth of NSE
The History of NSE of India was constituted in 1992 and authorized by the Securities and Exchange Board of India (SEBI) in 1993. The organization began functioning in April 1993, initially focusing on the wholesale debt market. They introduced their own cash market segment in 1994. Over time, it has grown significantly and has become one of the leading stock exchanges in the world with an average daily turnover of over INR 527.5 billion.
Since its establishment, the National Stock Exchange has worked tirelessly to transform the Indian exchanges through advanced technology and innovation. In 1995, NSE introduced its fully automated screen-based trading system, making it easier to buy or sell stocks electronically. The system offered greater time and effort convenience with faster trade execution and improved transparency. And by the end of 1999, it had completely replaced manual trading and become the first organization to achieve this milestone.
Evolution & Expansion
Well, the evolution of NSE began in the 20s when it launched another technological breakthrough. In 2003, NSE did something cool – with their internet-based remote trading facilities, they let regular people from all over India trade stocks online. Traders didn’t need to go to a fancy office or a special room and could practice trading through their own computers.
In 2009, NSE came up with two excellent initiatives. First, they made it easier for people to invest in mutual funds with their electronic mutual fund platform – Mutual Fund Service System (MFSS). Along with this, they launched Index Based Derivatives contracts, offering investors something to help protect money when the stock market goes up and down. Just like having an umbrella when it rains.
In 2010, NSE introduced the Depository Receipts product on their platform. This made it possible for global companies to raise capital from Indian investors without having to join an Indian stock market. The same year, they started the National Commodity & Derivatives Exchange Limited (NCDEX), where people can trade things like oil and gold online. With this, NSE introduced other financial institutions such as ICICI Bank and Life Insurance Corporation of India (LIC).
The Expansion – Diversification of Platform
After the inception of cool tools and technologies, NSE became home to various indices (sectorial and other) such as IT Index, FMCG index, S&P CNX Nifty Fifty index, CNX 100 index, and CNX 500 Index, etc. This gave investors the opportunity and options to create a wide portfolio and increase their appetite according to manageable risk.
NSE has been around for a long time and they keep coming up with new ideas, even when things get tricky with rules and politics. With the ability to innovate and stay ahead of the curve, it has modified its facilities with changing regulations, external factors, SEBI modifications, and political changes. They’ve shown that even a small group can do big things when they have support.
Significance and Impact
The National Stock Exchange (NSE) is a major hub for trading different derivatives, including futures and options contracts. It has revolutionized how people invest in stocks, offering everyone an easy and accessible way to exchange securities. Thanks to NSE- now trading is just one click away. It plays a crucial role in boosting the overall economy of India. Not only this, it has helped businesses grow and created more job opportunities in both the finance and trading sectors.
It is an international outlook that has brought global opportunities to Indian investors. With more money exchange, NSE has transformed the execution – making it quicker, faster, and easier. Although BSE started before NSE and functionality of both bodies are similar, the impact of NSE’s technology advance in the stock market sector is long-term. Let’s take a look at a few:
- NSE made it easy for everyone to invest in stocks, no matter where they live.
- It helps businesses get the money they need to grow and create jobs.
- NSE’s tech advancements made stock trading simple and convenient.
- Even when things get tough, NSE stays strong and stable.
- NSE doesn’t just handle money; it helps people and the country grow.
BSE v/s NSE
Although, both of these entities are renowned and reliable stock exchanges platforms in India. However NSE offers trading in equity, debts, and currency derivatives. Here are few points about NSE vs BSE:
| Aspect | NSE (National Stock Exchange) | BSE (Bombay Stock Exchange) |
| Establishment | Founded in 1992 | Established in 1875 |
| Ownership | Owned by various financial institutions | Listed as a public company |
| Trading Platform | Equipped with advanced electronic trading systems | Mix of electronic and open-outcry trading |
| Market Capitalization | Largest stock exchange in India | Oldest stock exchange in Asia, but smaller in terms of market capitalization |
| Benchmark Index | Nifty 50 is the key benchmark index | Sensex is the primary benchmark index |
| Location | Mumbai, Maharashtra | Mumbai, Maharashtra |
| Trading Hours | 9:15 AM to 3:30 PM (Indian Standard Time) | 9:15 AM to 3:30 PM (Indian Standard Time) |
| Indices | Houses various indices, including Nifty, Nifty Bank, etc. | Manages Sensex, BSE 500, and other indices |
| Ownership Structure | Owned by the National Stock Exchange of India Limited | Operated by BSE Limited, a public company |
| Trading Volume | Known for higher trading volumes | Trades at lower volumes compared to NSE |
| Technology | Utilizes advanced technology for trading | Combines electronic trading with open-outcry |
| Market Reach | Larger retail and institutional investor base | Broader retail and institutional participation |
| Trading Mechanism | Fully automated electronic trading | Offers both electronic and open-outcry trading options |
| Historical Significance | Established more recently in comparison | Holds historical significance as one of the oldest stock exchanges in the world |
Final Words
History of NSE is as exciting as its growth and evolution over the span of time. Its remarkable impact lies in making stock trading easier and boosting India’s economy. NSE has become a game-changer in the capital market of India with its advanced technology, reliable infrastructure, strong fundamental, and relevant regulations for traders. With its modern, adaptable stock market, it offers a stable, reliable platform while offering global investment chances by using technology.
FAQs
Who started the Indian stock market?
In 1875, the stockbroking business was set in motion by Mr. Premchand Roy Chand, known as the cotton king.
How many companies are listed on the national stock exchange?
National Stock Exchange is like a giant marketplace with over 5,000 companies offering their ‘money shares’ for trade as per the data available on the website.
What led to the establishment of the Securities and Exchange Board of India (SEBI)?
Like the referee, SEBI was created to ensure everything plays out fair and everyone plays by the rules designed by experts in the Indian stock market. SEBI is a crucial statutory body of the Indian Government which was introduced on 12th April 1992 under the SEBI Act 1992 to promote transparency in the Indian Investment Market. After the Harshad Mehta Scam, the parliament encouraged the development of autonomous bodies that protect the laws, prohibit securities markets, insider trading, and promote market transparency.
What is the significance of the BSE Sensex and Nifty 50?
Just like keeping the update on a cricket match score helps you know who’s winning, the Nifty 50 and Sensex help us interpret the ups and downs in the stock market. Both are the key indices of the Indian stock market and represent approximately 30 traded securities of the BSE. On the flip side, Nifty 50 includes top 50 stocks listed on the NSEs. Performance of both indices the overall health and trends of the Indian stock market. These indexes give traders a quick idea of how all the organizations on the stock market are performing, and that’s why they’re really significant.
How did the COVID-19 pandemic affect the Indian stock market?
Just like a rollercoaster, during COVID-19, the stock market went on a wild ride. People panicked and traders faced significant knock down in the prices. The Sensex index dropped 13.2% on March 23, 2020, which is the highest single, after the Harshad Mehta Scam news released on April 28, 1991. The impact remained for a while but the market recovered completely by the end of October 2020.
What are the Indian Stock Market Timings?
The Indian stock market opens for business at 9:15 AM and closes at 3:30 PM, from Monday to Friday. Although the market also remains closed on national holidays or festivals too.
Which is the biggest stock exchange in India?
The National Stock Exchange (NSE) is like the big brother of all stock markets in India. However, BSE was established before and is one of the top 10 largest traded stock exchanges in the world.
When and how did the stock market begin?
The history of stock market beginning traces back to 1611, when the first modern stock trading was created in Amsterdam. The first traded company was Dutch East India which was also the only traded company in exchange history for many years. On the other hand, the Indian stock market started in a rather unique way, back in the 19th century. These people were like the early pioneers who decided to start trading ‘money papers’ which eventually grew as the whole Indian stock market as well.
What factors significantly influence the Indian stock market?
The stock market is like a seesaw and there are several factors that can affect the stock market whether it’s Indian or belongs to another country. Among several factors, things like company earnings, economic news, war, financial reports, and even big events happening around the world make it go up and down.