Bombay Stock Exchange (BSE)

by · June 12, 2012

The Bombay Stock Exchange (BSE) often referred to as Dalal (broker in local language) Street due to its location on the street of that name, is Asia’s oldest stock exchange and also the sixth largest in Asia. It ranks as 14th largest stock exchange in the world with market capitalization of its listed companies touching US$ 1 trillion as of December 2011.

As of March 2012, BSE has more than 8,196 tradable securities that included stock of 5,133 listed companies, which is by far the more than in any other exchange in the world. Its benchmark index is called the BSE SENSEX or BSE 30. There were earlier many other stock exchanges spread across different big cities across India but with the establishment of a new National Stock Exchange (NSE) in 1992/93, BSE and NSE account for the majority of trading in capital markets, equity, bonds and other financial instruments. Although market capitalization of both BSE and NSE are almost similar, trading volumes in NSE are almost double of BSE.

Trading Hours

  • 8.30 am to 9.30 am IST – Beginning of the day session
  • 9.00 am to 9.15 am IST – Pre open session
  • 9.15 am to 3.30 pm IST – Trading Session
  • 3.30 pm to 3.50 pm IST – Position transfer session
  • 3.50 pm to 4.05 pm IST – Closing session

IST stands for Indian Standard Time (GMT + 5:30). The BSE is open for normal trading sessions five days a week except for national holidays and festival holidays announced in advance at the beginning of each year.

History

Although recognized by the Indian Government under the Securities Regulation Act in 1956, the Bombay Stock Exchange traces its history to a hundred and six years before that when five stockbrokers, four Gujarati and one Parsi used to gather in front of Mumbai’s (then Bombay) Town Hall under a banyan tree. As the number of brokers kept increasing, so did the venue of these meetings till the time they finally moved to Dalal Street in 1874. In 1875 the members formed an official organization and came to be known as The Native Share & Stock Brokers Association.

The BSE currently operates form Phiroze Jeejeebhoy Towers, an impressive 39-storey building in downtown Bombay at Dalal Street, Fort, Mumbai (name changed from Bombay).

For three decades there was no benchmark index for measuring the performance of BSE. In 1986 it gave itself a measure by developing the BSE SENSEX and fourteen years later in 2000 it used the index for opening its derivatives market for trading futures contracts in the BSE SENSEX. The BSE trading platform expanded with the opening of SENSEX options trading and derivatives in individual equities in 2001 and 2002.

Bombay Stock Exchange changed from the historic open outcry floor trading to an electronic system in 1995. The transition was smooth and quick and took only fifty days. As of today, BOLT, short for BSE OnLine Trading, the automated trading platform has the capacity of handling 8 million orders on daily basis. BSEWEBx.co.in is world’s first exchange-based trading system that allows investors across the world to trade to trade on the BSE platform.

SENSEX Chronology

Circa 1830 – Trading in shares of banks and cotton presses starts in Bombay.

Between 1860 and 1865 – The American Civil War results in a cotton price bubble.

Between 1870 and 1890’s – There is a huge increase in prices of shares of jute mills. A boom in tea and coal shares follows.

1986 – The BSE SENSEX is compiled on the basis of market capitalization-weighted method. The index comprises shares of 30 top companies across key sectors. 1978-79, the base year of SENSEX is defined to be 100.

30th October 2006 –SENSEX is up 117.45 (0.9%) and moves above the sentimental figure of 13,000 to close at 13,024.26, a jump of nearly 1,000 points in 135 days.

5th December 2006 – The SENSEX touches 14,028 taking only 36 days in its run-up from 13,000 to 14,000.

6th July 2007 –SENSEX achieves another high of 15,000. This time it takes seven months to move from 14,000 to 15,000.

19th September 2007 – BSE SENSEX scales yet another high in early morning trade rising by 450 points from the previous close to cross 16000. This time the 30-share Bombay Stock Exchange’s sensitive index takes only 53 days to rise 1,000 points to cross 16000. S&P CNX Nifty, the benchmark index of the National Stock Exchange is also up 113 points and touches a new high of 4659. By the end of the day, SENSEX gains 654 points and closes at 16323 while the NSE Nifty gains 186 points and closes at 4732.

26th September 2007 – The bull market continues to gain strength and within minutes of opening trade, the SENSEX goes beyond the 17,000-mark but closes at 16921 after some profit taking, gaining only 22 points.

9th October 2007 – This time it is for real and takes only 8 days to jump from 17000 to 18000 with an intraday high of 18,327. It finally closed at 18280, a gain of gained 789 points in a single day. The day also marked the setting of new records. 789 points was the biggest single day gain at close. The intraday gain of 993 points was also the highest. The market seemed to be in a frenzy over the news that the UPA and the Left would be meeting on October 22; news that the market read as being a positive for warding off mid-term elections.

15th October 2007 – The SENSEX moves up yet again to cross 19,000 riding on the funds-based buying in blue chip stocks in metal, capital goods and refinery sectors. It took the index only 4 trading sessions to gain the last 1,000 points. During the course of the day the SENSEX touched 19,096, and finally ended at 19059, a handsome gain of 640 points. The NSE Nifty also gains 242 points to close at 5,670.

29th October 2007 – The SENSEX takes ten trading sessions to gain 1000 points to cross the 20,000 mark during the day riding on aggressive buying by foreign investment institutions ahead of the US Federal Reserve meeting. Major buying was in index heavyweights such as Larsen and Toubro, Reliance Industries, big banks like State Bank of India, ICICI and HDFC Bank among others. The 30 scrip index forged ahead in the last five minutes of the trading session, touched 20024.87 and closed on a new closing high of 19,977.67, gaining 734.50 points. The NSE Nifty experienced a similar surge and rose to 5,922.50 points before ending at 5,905.90, showing a super handsome gain of 203.60 points.

8th January 2008 – After two months of range bound movements, the SENSEX peaks yet again; this time scaling dizzying heights. It moves above the 21,000 mark in intraday trading backed by increased FII investment and strong corporate results for the third quarter but moves to sub 21000 levels at the end of the day level due to profit taking.

13th June 2008 – All hell breaks loose. The SENSEX closes below the 15,200-mark, a fall of above 500 points since the January high.

25th June 2008 – The free fall continues and the BSE benchmark index touches an intraday low of 13,731 in early trade but pulls back to end at 14,220 in face of fresh buying. FII outflows however continued and the 50 bps hike in CRR by the Reserve Bank of India was another negative.

2nd July 2008 – The SENSEX hits the 52-week low of 12,822.70. Only six months back on January 10, 2008, the market was at an all time high of 21203.70. Reliance Industries and Infosys lead the way with positive results but overall it is bad time for the market.

6th October 2008 – The bad news continues; the SENSEX closes at 11801.70, the lowest in 24 months.

10th October 2008 – More bad news; a fall of 800.51 points after having recovered from a fall of 1063 points and the BSE index closes at 10527. The week sees the largest percentage fall in recent times.

18th May 2009 – The results of the 15th general elections bring cheer to the markets and the SENSEX gains 2100.79 points from last days close of 12173.42. The system hits the upper circuit as the market gains 15% in opening trade and trading is suspended for two hours. On resumption of trading, the surge continues and trading in suspended for the day.

19th October 2010 – A 15-minute pre=opening session is introduced by BSE to allow investors to place trades before the market opens.

5th November 2010 – The BSE SENSEX closes at 21004.96.

27th December 2010 – BSE SENSEX closes at 20,028.93

Ever since, the BSE has been range bound with a negative bias. It is currently (as on 11th June 2012) trading at 16668.01

Indices

Three years after the BSE SENSEX was developed with 1978-79 as base year, the Bombay Stock Exchange followed it up by launching the BSE National Index with 1983-84 = 100 as the base. The new index constituted of 100 stocks listed in five leading stock exchanges in India, Bombay, Calcutta, Madras, Delhi and Ahmedabad. It was later renamed as BSE – 100 Index on October 14, 199. From then on, it is being calculated only on the basis of prices listed at the Bombay Stock Exchange. On 22nd May 2006 BSE launched a dollar-linked version of the BSE-100 Index.

Two new indices, BSE-200 and Dollex-200, were launched on 27th May 1994. BSE-500 Index and 5 new sector-based indices were developed and launched in 1999. The BSE PSU Index based on listed public sector undertakings was launched in the year 2001, when trading also began in the country’s first free float index, the DOLLEX 30. Since then, BSE has gradually shifted all its indices to free float except for the BSE-PSU.

BSE provides on daily basis information related to price to earnings ratio and dividend yield percentage of all its indices. Value of all BSE indices is displayed prominently on the BOLT platform and updated in real time during trading sessions. The latest values of its major indices are also available on the BSE website as well as on wire services. The BSE Index Committee comprising of prominent professionals reviews all BSE indices at regular intervals and also frames broad policy for the indices so that they remain indicative of the ground realties of the markets.

Felicitations

The Bombay Stock Exchange has many a feathers in its cap.

  • The ICAI award for excellence in financial reporting to the Annual Reports and Annual Accounts of BSE for the financial years ending 31st March 2006 and 2007.
  • Reuters has cited BSE as one of the best performing stock market in the world.
  • Initiatives made by BSE in the field of corporate social responsibility have been awarded the Golden Peacock Global CSR Award by World Council of Corporate Governance.
  • The Human Resource Management arm of the BSE has done excellent work in employer branding through excellence in HR technology, talent management and health management at work. For its efforts, HRM at BSE was awarded the Asia–Pacific HRM award.

Tags: