Introduction to the Indian Share Market
The Indian share market is one of the fastest-growing markets in Asia. Investors are increasingly looking for opportunities in this vibrant market as it offers potential for high returns. In this blog post, we will provide the latest updates and insights into the Indian share market.
History of the Indian Stock Market
- Formation of the Bombay Stock Exchange (BSE) – 1875
The origins of the Indian stock market can be traced back to 1850 when stock trading began informally under a banyan tree in Mumbai. Eventually, in 1875, the Bombay Stock Exchange (BSE) was officially established, making it Asia’s oldest stock exchange. The BSE played a crucial role in shaping India’s financial market, allowing businesses to raise capital and investors to trade shares.
- Establishment of the National Stock Exchange (NSE) – 1992
The National Stock Exchange (NSE) was founded in 1992 to modernize stock trading in India and provide a technologically advanced and transparent trading platform. It introduced screen-based trading and helped eliminate issues related to fraudulent activities and manual trading.
- Dematerialization and Electronic Trading – 1996
With the introduction of dematerialized (Demat) accounts and the Depository Act in 1996, physical share certificates were replaced with electronic records. This transformation made stock trading more efficient and secure, boosting retail investor participation.
- Growth in Market Capitalization and Foreign Investments
Since the liberalization of the Indian economy in 1991, the stock market has attracted foreign institutional investors (FIIs) and domestic institutional investors (DIIs). The introduction of Foreign Direct Investment (FDI) policies and stock market reforms fueled rapid growth, making India one of the top investment destinations globally.
Keys of Indian Stock market
The Indian stock market operates under a well-defined regulatory framework. The key regulatory and controlling bodies include:
- Securities and Exchange Board of India (SEBI)
- Regulates and protects investor interests.
- Monitors stock exchanges, brokers, and listed companies.
- Prevents insider trading and market manipulation.
- Bombay Stock Exchange (BSE) & National Stock Exchange (NSE)
- Provide trading platforms for equities, derivatives, commodities, and debt instruments.
- Facilitate liquidity and price discovery.
- Reserve Bank of India (RBI)
- Regulates banking and monetary policies that influence stock market liquidity.
- Ministry of Finance (Government of India)
- Plays a role in policymaking and taxation regulations related to stock investments.
- Depositories: NSDL & CDSL
- Ensure smooth Demat account functioning and shareholding transparency.
- Foreign Institutional Investors (FIIs) & Domestic Institutional Investors (DIIs)
- Large institutional investors that drive stock market movements.
Returns Provided by the Indian Stock Market
The Indian stock market has generated significant returns for long-term investors. Here’s a look at its performance over the years:
- Returns from the Sensex (BSE Index)
The BSE Sensex, India’s oldest and most well-known stock market index, started with a base value of 100 in 1979. Over the years, it has provided impressive returns:
- 1980s: Sensex grew from around 100 in 1979 to about 1,000 in 1991.
- 1990s: Despite economic turmoil, the market grew steadily, reaching around 5,000 by 1999.
- 2000s: The index crossed 20,000 for the first time in 2007 before the 2008 global financial crisis brought it down.
- 2010s: With economic recovery and reforms, the Sensex reached 41,000 by the end of 2019.
- 2020s: Post-pandemic rally and strong corporate earnings pushed Sensex beyond 70,000 by 2023.
- Returns from the Nifty 50 (NSE Index)
The Nifty 50, launched in 1996 with a base value of 1,000, tracks the top 50 companies on the NSE. It has consistently delivered long-term returns of around 12-15% CAGR (Compounded Annual Growth Rate) over the past two decades.
- Individual Stock Performance
Several blue-chip stocks like Reliance Industries, TCS, Infosys, HDFC Bank, and Asian Paints have created enormous wealth for investors over time, generating multibagger returns (stocks that have grown multiple times their original value).
- Returns from Different Asset Classes in the Stock Market
- Large-cap stocks (Sensex/Nifty 50) have delivered 12-15% annual returns.
- Mid-cap stocks have historically provided 15-20% CAGR.
- Small-cap stocks, though riskier, have delivered 20-25% CAGR over long periods.
- Mutual funds investing in the stock market have given 10-14% average annual returns, depending on fund type and management.