An informal group of 22 stockbrokers had been trading under a banyan tree opposite the Town Hall of Bombay from mid-1850s. This banyan tree still stands in Horniman Circle Park, Mumbai. This informal group of stockbrokers organized themselves as “The Native Share and Stockbrokers Association” which, in 1875, was formally organized as the Bombay Stock Exchange (BSE). BSE is the oldest stock exchange in Asia. 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. James M. Maclean inaugurated the Brokers’ Hall in January 1899. After the First World War, BSE was shifted to an old building, near the Bombay Town Hall and in 1928, the plot on which the BSE building now stands, on Dalal Street, was acquired, and a building was constructed in 1930.

The Bombay Stock Exchange followed the familiar outcry system for stock trading, which was replaced, in the year 1995, with screen-based eTrading. BSE is presently housed in a 28-storied Jeejeebhoy Towers, where the older structure once stood: the present building derives its name from Sir Phiroze Jamshedjee Jeejeebhoy, the chairman of the Bombay Stock Exchange from 1966, until his death in 1980.

There are around 3,500 companies in the country listed in BSE which and have a significant trading volume. As of July 2005, the market capitalization of the BSE is about Rs. 20 trillion (US $466 billion). The BSE `Sensex' is a widely used market index for the BSE. As of 2005, it is among the 5 biggest stock exchanges in the world in terms of number of transactions.

The National Stock Exchange (NSE) was established in April, 1993. It is also situated in Mumbai and is therefore referred to as the “financial capital of India”. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. Along with the NSE, the companies listed on the BSE have a combined market capitalization of $125.5 Billion.

Reforms in financial markets were high on the priorities of policy makers when India embarked on market-oriented reforms in the early 1990s. These efforts had several motivations: the broad idea of markets playing a dominant role in resource allocation, an awareness of the opportunity cost that India was suffering from by not being open to global capital flows and an immediate reaction to the fixed income and equity market scandal of 1992. The decade following 1990 was marred by a steady procession of episodes of gross market misconduct that regularly made headlines in most newspapers for a prolonged period of time. These episodes had greatly affected the core functions of the equity market.

It’s fair to say that we have learnt from our mistakes as a result of which, we have a much more robust market system today.