The Legacy of Stock Market’s Uncertainties in India

Stock exchanges began operating in India in 1875. The BSE is India’s oldest stock exchange. The history of Indian stock trading begins with 318 people joining the Native Share and Stock Brokers Association, which later became known as the Bombay Stock Exchange or BSE. The Government of India granted BSE permanent recognition in 1965. In terms of popularity, the National Stock Exchange behind the BSE. The terms BSE and NSE are used interchangeably to refer to the Indian stock market. The history of the Indian stock market is nearly identical to that of the BSE.

The Sensex, or 30 stock sensitivity index, was created in 1986. The Sensex is calculated using the stock performance of 30 financially stable benchmark firms. For the first time in 1990, the BSE surpassed 1000 points. In 1992, it surpassed the 2000, 3000, and 4000 mark. The reason for such a large increase in the stock market was the then-financial minister, Dr. Man Mohan Singh’s, liberal financial policies.

With the Harshad Mehta scandal, the market’s upbeat mood was abruptly destroyed. It was revealed that Mr. Mehta, also known as the “Big Bull” of the Indian stock market, defrauded banks of large sums of money. He had 270 million shares in around 90 firms to play with. As the Sensex dropped flat, losing 570 points, millions of small-scale investors were victims of the hoax.

The Securities and Exchange Board of India was established by an Act in 1992 to prevent such frauds. SEBI is the statutory agency in charge of overseeing and regulating the operations of stock exchanges, brokers, sub-brokers, portfolio managers, investment advisors, and other financial institutions. To protect the interests of investors, SEBI imposes a number of stringent regulations. According to top SEBI officials, the prospects of a fraud have virtually vanished since the introduction of online trading and daily settlements.

History of unpredictability

The market’s unpredictability earned it the moniker “volatile market.” Let us examine history to gain a better understanding of the situation. Good monsoons, the coming to power of the Bharatiya Janata Party, and other factors influenced the market in the past. The outcome of an international cricket match between India and Pakistan had an impact on the Indian stock market. During the 2004 general elections, the National Democratic Alliance, led by the BJP, tried unsuccessfully to gain power by riding on market sentiments. As a result of fears that the Congress-Communist combination would stymie economic changes, the NDA was voted out of power, and the sensex fell the most in a single day. Following Prime Minister Man Mohan Singh’s vow of “reforms with a human face,” the market reacted strongly, reaching an all-time high of 8500. 

Similarly, in recent times, Covid has had a significant impact on the market since the end of 2020, and it showed signs of improvement in the middle of 2021.

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After the United States, India has the most publicly traded enterprises. Global investors are increasingly looking at India as a potential investment destination. The stock market, which was once viewed with mistrust, now appeals to middle-class Indians as well. Many Indians who work in other countries are now investing their money in equities. This current occurrence is the outcome of the advent of online trade and the reduction of bank interest rates. Indian stockbrokers are opening offices in several places to cater to the demands of non-resident Indians. NRIs benefit from the time element as well. They can buy and sell stock online once they get home from work.

The initial public offerings launched by Tata Consultancy Services, Reliance group companies, adani, Maruti Udyog Limited, ONGC, and other large names have sparked increased interest among the Indian middle class. Market sentiments are generally boosted by good monsoons. A favourable monsoon means better agricultural yields and higher spending power among rural residents.

The stock market’s bullish run can be attributed to GDP growth of over 7%, the expansion of Indian corporations into MNCs, and the significant potential for growth in the telecommunications, mass media, education, tourism, and information technology sectors, all of which are backed by economic reforms.

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