BAZAAR- Ek Katha
In the scorching afternoon heat of Mumbai, we were heading towards a vintage Parsi cafe to hang out with some old friends. While we were busy enjoying Avicii’s music in the car, we did not realize that we are moving towards the nucleus of an insanely developing city that looked like a huge LED Board from the evening flight. Our attention then moved to some mid age, casually dressed people clicking a selfie under a banyan tree. “That’s the cradle of Indian Stock Market” said Anant, a friend who heads the branch of a leading broking house in India.
Soon we reached the café and conversations started and Anant mentioned, “In the shadow of that ancient Banyan tree, there is a sense of history”. That is the tree under which Indian cotton merchants would meet in the 1850’s and conduct their daily trades. Later, they moved to a trading hall in Dalal Street. However, they lacked the funds to pay the monthly rental, a princely sum of Rs. 100.
The man who came to their rescue was Dinshaw Maneckji Petit, also founder of the first textile mill in India. Along with other members, the gentleman provided the initial capital to initiate The Native Share and Stockbrokers’ Association, which later became the very renowned stock exchange of India – Bombay Stock Exchange. BSE enjoyed a numero-uno status in the share market right up to the 1990s.
Listening all about this history, everyone got excited to know more alongside authentic dishes like Akuri and Patra Ni Machi.
So, Anant continued with his story –
Idea of National Stock Exchange (NSE)– It was first seriously contemplated in 1993 with multiple arguments across the board, with much merit. Also, the OTCEI, a previously state–sponsored exchange had not fared well and hence, created skepticism in the proponents of the exchange. As of 1993, there had been no precedent of a second exchange taking liquidity away from an established trading venue (in this case, BSE).
However, within one year of the onset of equity trading at NSE, it became India’s most liquid stock market and since then, the exchange has gained immense merit over the last couple of decades. NSE is also credited with the initiation of new institutions (the Clearing Corporation and depository) and playing a vital role in injecting new ideas into the securities markets (such as derivatives trading). In the November of 2020, the exchange hit a lifetime high turnover of Rs 1,47,460 crores in a single day.
These changes resulted in a complete transformation of the market design of the equity market. Though the transition from physical share certificates to depository settlement led to a loss of thousands of jobs, the process took place without much friction. Over the decade of the 1990s, at least a hundred significant brokerage firms went bankrupt because of these changes.
While these changes were in action, the decade of the 1990s was marred by a steady procession of stock market crises. These crises and have played an important role in bringing about a sea of changes, especially from a security perspective. Hereunder, we have stated three most significant stock market scams that reshaped multiple elements of Indian capital markets –
While everyone was still looking and listening intently to Anant, food made the way to our table. After enjoying a live story of the market, hunger and appetite got exponentially high and food squared off soon. As we started our journey to get home, Anant again mentioned “The most challenges on the equity market are no longer of market design, but of the governance and enforcement”. Well, that is something that I will never forget because inherently, governance & enforcement are key elements in any organization, practice and/or ecosystem!
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Thank you Yuva members for organising such a fun and informative lecture. We enjoyed it a lot. Meeting and learning from Mihir Sir was really an amazing experience. And this is not only our feeling but all the students enjoyed his lecture very much and look forward to many such events.
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