CHAPTER 2 fflSTORY OF THE INDIAN CAPITAL MARKET

Early Beginning Amassing Wealth Under Premchand Roychand Leadership Formation Of The Stock Exchange, Bombay Formation Of Other Regional Exchanges Swadeshi Movement Era Of Post-Independence Era Of Post FERA Amendments EraOf Liberahsation Of The Economy The Stock Market Today CHAPTER 2 HISTORY OF THE INDIAN CAPITAL MARKET

EARLY BEGINNING The history' of the Stock Market in India days back to 1800 A.D. The origin of the Stock Market goes back to the time when securities representing business properties or pubhc debts and / or business debts were first issued and made transferable from one person to another. The East hidia Co. Ltd. was the dominant Institution in those days and business by and large was done in its loan securities only towards the close of 18th century. However, the earliest records of securit>' transactions in India were very meager.

By 1830's there was regular increase in volume of business in loans and also in corporate stocks and shares. At that time the city of Bombay was the only place where business was done in the shares prominently of Banks like the Commercial Bank, the Chartered Bank, The Oriental Bank, The Chartered Mercantile Bank and The Old Bank of Bombay. The prominent shares other than Banks were those of Cotton Presses. In Calcutta in or around 1836 the quotations of loans of East India Company and shares of Bank of Bengal at heavy premium were seen. There were buyers of bank shares at Rs.SOOO premium and sellers at a premium of Rs.7500 per share. This business in Bombay as well as Calcutta upto 1850 was done by a few

28 handful brokers recognized by Banks and Merchants. In 1850 the Companies Act with limited liability was introduced and enacted. The era of modem joint stock enterprises in India had commenced since then.

AMASSING WEALTH UNDER PREMCHAND ROYCHAND LEADERSHIP The history of Premchand Roychand & Sons is the early history of brokers and their rise to power in Bombay. From 1850 to 1865 witnessed a rapid development of commercial enterprises with the introduction of Railways and Telegraph services. At this time there was increasing demand for the exports from India to Europe was witnessed. Along with the brokerage business prospering there was the growth of Hundi business also. The legendary Mr.Premchand Roychand was undoubtedly the leader of brokers' community as he was the first broker who could speak and write English at that time. In view of this there was no wonder why within a few years from 1850, Mr.Premchand monopolized the broking business in shares, stocks, bullion and foreign Exchange besides all the best gilt- edged security of those days. The display of the brilliance in financial strategies crowned Mr.Premchand as the Napolean of finance. Mr.Premchand floated banks and financial institutions, land and sea reclamations' companies and companies of diverse kinds were promoted through his goodwill and wealth. Thus Mr.Premchand was the maker of The Stock Exchange history.

29 The American Civil War broke out during 1860-61 rendering the stoppage of supply of cotton to Europe. This so-called famine resulted into large demand on India and the Bombay Presidency witnessed large business in the cotton. The progressing civil war witnessed the rise in the cotton prices, the payment of which was made in the form of gold and silver pouring from U.K. The expanding exports resulted into amassing the wealth by Bombay resulted into formation of many new companies their market premiums between 1863-65 as stated below :

TABLE No. 9 NEW COMPANY FLOTATICXVS, 1863-65

(Rs.i ncrore) No. Kind of Company Paid-up Capital Market Premia

25 Banks 13.64 10.94 69 Financial Associations 6.22 4.42 7 Land Reclamation Cos. 8.34 17.56 30* Miscellaneous Cos. 1.56 5.00 131 29.76 37.92

* Approximate (Source : The BSE Official Directory "History of the Stock Market In India ")

In the immediate future the shares of Asiatic Banking Corporation, Old Bank of Bombay and the Backbay Reclamation, Mazgaon land. Port Canning, Elphinstone Land and various other companies shares were issued and were quoting at a heavy premium. Anybody and everybody

30 irrespective of caste and creed were deeply busy with the allotments of shares, buying gold and silver. It was like a madness which was indescribable. There was nothing that was floated whose shares did not command premium at very high level. The Back Bay Reclamation share with paid-up value of Rs.5000 was at a premium of Rs.50000 while the share of Port Canning with paid-up value of Rs.lOOO was at Rs. 11000 premium. The Mazgaon Land share was at a premium of Rs.9000, and the share of Elphinstone Land was at more than 500 percent premium. Some of the Banks' and Financial Associations' shares were commanding handsome premiums. Bank of Bombay share with Rs.500 paid up value was quoting at Rs.2850 as the highest price.

People only realized when the end of American Civil War came and all were rushing to sell their securities, shares; only to find that they had accumulated non-saleable mass of papers. The fatal day was 1st July, 1865 when hundreds of time bargains matured which no one was in a position to fulfill. One time The Bank of Bombay share quoting at Rs.2850 could only be sold at just Rs.87. Similarly, the Back-Bay Reclamation share which was sold at Rs.5000 premium could be sold only at Rs.l750. Likewise all shares were sold at very low prices. A large number of Companies failed and there were a few solvent companies left. A special legislation. Act XXVIII of 1865 had to be enacted quickly to deal with the mass failures and such liquidations went on till 1872 or so. Though the depression was

31 long and severe, the share mania resulted into expansion of liquid capital and establishment of regular market in securities. All this resulted into helping Bombay to make itself the main center of money and capital market. This brought recognition to Bombay as the Financial capital of India.

Along with the development of the market activity there were legislations coming up to regulate the healthy growth of the market. In around 1860, the number of brokers was about 60 and during the American Civil War time and resultant development of the economy showed an increase in the number of brokers to about 250. The economic prosp»erity brought a special status to the brokers and were treated as a privileged class. However, Post-American Civil War period resulted into rude shock and disillusionment. The one time privileged brokers became a hated class of people. The place of trading also was changed in quick succession as the broking business developed a feeling of nuisance to the customers and public at large.

FORMATION OF THE BOMBAY STOCK EXCHANGE This disillusion period between 1868 - 1875 brought efforts to organize the association of the brokers called The Stock Exchange, Bombay, with the rules and regulations to govern the activities of the brokers, and the growth of the market. The tiien association of the brokers was called "Native

32 Share and Stock Brokers' Association". On 9th July, 1875 the Stock Exchange Bombay (Now Mumbai) was given formal recognition by the then Government of India. When the exchange was formed in 1875 the entrance fee for new member was Re.l and there were 318 members on the list. The number of members increased from time to time to about 478 in 1920 and the entrance fee also increased from Rs.5 in 1877 to Rs.48,000 in 1920. At present there are about 620 members with a right of nomination to transfer the right of membership with the approval of Governing Board of the Exchange. The membership right is called a "Card" which is similar to tlie concept of the "Seat" as is called in London and New York Stock Exchanges.

Since the formation and recognition of the Stock Exchange at Bombay, as stated above it was later on called "The Stock Exchange, Bombay" and in brief BSE which short form is recognized all over the world and is valid even today. After the formal recognition of the stock exchange at Bombay brought the consolidation of the same in stages and exchange had its own piemises at the present location, situated in the comer of Dalai Street and Hamam Street facing Apollo Street (Now Mumbai Samachar Marg). This transfer took place from humble beginning of activity under the banyan tree in the Cotton Green or now known as Homimon Circle to the owned premises of the exchange as stated above.

33 FORMATION OF OTHER REGIONAL EXCHANGES With the development of BSE there were other regional stock Exchanges being established which were as follows : l.The Ahmedabad Share and Stock brokers' Association The cotton textile industry which was primarily established in Bombay also contributed to the development of Ahmedabad, as the next prominent city in the then Bombay Presidency. Soon after 1880 many cotton textile mills I were established in Ahmedabad and they all were successful. Therefore there was a need for trading in the shares of those companies which were set up as joint stock companies. Some of the residents of Ahmedabad had even inherited tradition for dealings in stocks and shares, having participated in the Share Mania of 1860s in Bombay. In fact many Bombay brokers hailed from Ahmedabad and nearby places. Accordingly, as the new textile mills were floated Ahmedabad brokers had canvassed for selling the shares of these mills. The volume of business at Ahmedabad grew steadily till 1894 when the brokers formed themselves into an association under the name and style of "The Ahmedabad Share and Stock Brokers' Association". It was formed as voluntary non-profit making association, with a Trust Deed and the Deed of Association on similar lines as The Stock Exchange in Bombay. It followed the Bombay rules and practices as some of the members had broker relatives in Bombay. Ever since then a very close correspondence has been maintained with Bombay. The Ahmedabad brokers dealt in the shares of local textile mills and in

34 shares of the then Managing Agency Houses who controlled those companies. The steady growth in the volume of business till almost end of first World War enabled the exchange to move into the premises at Manek Chow where it continues to be even today. Initially the exchange operated in the rented premises and later purchased and constructed its own property. In 1994 the Ahmedabad Exchange celebrated its Centenary.

2. The Calcutta Stock Exchange Association At the commencement of 20th Century the stock exchanges at Bombay and Ahmedabad were well set up on properly organized lines, but Calcutta Stock Exchange was not so constituted. The only large organized industries were tlie cotton mills of Western India, the jute industry of Bengal and Coal and mining industry of Bihar, Orissa and Bengal. The Jute industry of Calcutta was like Cotton Textile Industry of Bombay, and jute mills were coming up on the banks of the Hooghly river. During the boom of 1861-65 there were 91 joint stock companies in whose shares the business was done in Calcutta. By and large Tea companies' shares were predominantly traded followed by Coal and Steam Tug companies. As many as 38 Tea companies' shares were traded at that time. By the turn of the century there was a boom in the coal industry and shares of the coal mining companies. The shares of some companies jumped as shown in the following table:

35 TABLE No.lO PERFORMANCE OF SOME OLD COMPANIES

Name of the Company Earlier Price Boom Period Price (Rs.) (Rs.)

Burrakur Coal 85 540 Bengal Nagpur 22 104 Raneegunge 11/2 43^2 New Beerbhoom 167 615 Reliance Coal 160 500 1 (Source : "History of Stock Markets In India " by BSE)year However the boom broke in 1908 followed by a severe depression. At long last after facing several problems by brokers an association was formed in 1908 called "The Calcutta Stock Exchange Association". Initially located in 20 years lease premises, the exchange moved in its own property in 1926 on 99 years lease which land was purchased in 1933 at Lyons Range and Royal Exchange Place. Thus the Calcutta Stock Exchange got consolidated through these developments.

3. Madras Stock Exchange limited After the First World War only about two brokers started a Stock Exchange in 1920 only to go out of existence in 1923. However, in South India there was a rapid growth/increase in the number of textile mills and plantation companies. Simultaneously there was growing interest of investors in stocks, shares and securities in and around 1935 when the

36 number of European and Indian brokers was increasing. Therefore on 4th September, 1937 a stock exchange was formed in the name of "Madras Stock Exchange Association (Private) Limited". Just about a dozen of transactions used to take place, and the business was confined to gilt- edged securities, plantation companies shares and the shares of London companies. In 1937 there were 5 members of the exchange and there were 84 companies listed.

With the rapid industrialization of Tamil Nadu and the neighbouring states, there was systematic and steady growth of exchange and its business. The Madras Stock Exchange was reorganized as a new company limited by guarantee under the name of Madras Stock Exchange Ltd. on 29th April, 1957 and moved into its own building in 1964.

There were other places also where stock exchange activities were carried on and the local brokers in such areas took initiative to start formal stock exchanges and therefore today there are 23 stock exchanges in India. There were some rival stock exchanges started by some people who could not get membership of recognized pxchanges in view of their Bye-laws restrictions. However, in the time to come all these rival exchanges could not function well nor they were recognized, as these exchanges indulged in more speculative business and that too in a few scrips only. Again such

37 exchanges could not obtain any support from public and therefore went out of business.

SWADESHI MOVEMENT With the turn of 19th Century there was an industrial revolution in India which had sown its seeds during middle of 19th Century itself The revolution was in transport and means of communication with the network of railways being built around that time. Later on plantation industry also was getting established in tea, coffee and indigo estates. Then there were two very important industries started viz. Cotton Mills in Bombay and Jute Industry in Bengal. The industrial revolution then spread to mining and other areas such as of coal, manganese, gold and mica, rice mills and oil mills etc.

The opening year of 20th Century saw the birth of Local industries in the form of true "Swadeshi" movement, which sent in great wave of industrial enthusiasm. This wave culminated in inauguration of "The Tata Iron and Steel Co.Ltd." in 1907 by the house of Tatas. The Industrial revolution prosperity. First World War boom and Second World War boom brought prosperity to the brokers and there Was healthy growth of exchanges upto 1947 i.e. Independence of India. The post independence period during which sociahstic pattern of planning was persuaded, saw the growth of the stock exchanges not with the pace of the other international markets.

38 The transformation of the Indian Capital Market since Independence has been divided in three time spans. They are : I. 1947 to 1984 Post Independence Socialistic Pattern of Development II. 1985 to 1991 Post Foreign Exchange Regulation Amendments III. 1992 to date Liberalization Era

The time spans are selected and divided with reference to vital turning points and therefore they are focusing towards the targets set by the Government of India, Captains of Indian Industry, the Indian Capital Market and its regulators SEBI and above all the Investors.

I ERA OF POST INDEPENDENCE - After Independence the Indian government was in the mood of planning the economy on socialistic pattern. It was a controlled economy. The planners wanted to transform agro based Indian economy into industrially developed economy without loosing agriculture as the important industry via Five Year Plans. The controlled economy via planning was responsible for the emergence of Licensing and Quota Raj which stagnated the growth based on the limited resources available in the economy.

Thus the industrial growth was Hmited to a certain and a few industries only and the growth of the economy was therefore restricted to certain sectors. Again the government had to fight natural calamities like famines 39 and flooding, besides facing two wars with neighbouring country.

During the immediate post-independence years, government had also to look at various inherited statutes in operation and had to consider amending them to suit changes of thinking of an independent nation. Accordingly, the Companies Act, 1956; Securities Contract Regulation Act, 1956; Foreign Exchange Regulation Act 1947 and amended in 1973 and was further amended in 1984 were brought in afifecting the corporates and the capital market directly. Various committees like A.D.Gorwala Committee, G.S.Patel Committee etc, were appointed to review the Stock Exchange Regulations, All these measures were taken to organize the Stock Market in India properly and on sound footings. TVi. \D\5G The overall industrial growth through sociaUstic planning with the 5 years plans could be achieved in textile, automobile, cement, steel, heavy engineering, pharmaceutical, chemicals and also diversified grov^ in the agriculture. However, the investment of the foreign capital was negligible and was restricted to government level of the other countries. The private investment, if any, was largely towards trading by the foreign controlled units. Therefore, the capital formation was restricted and slow in the nature.

40 At the same time the USA, West Europe, China, Japan and South Korea were developing very fast. Therefore Indian Economy was treated as developing or underdeveloped economy. Both agriculture and industry were growing at very lower rate and at times there was no growth on account of high inflation, constantly growing expenses on defence, natural calamities and above all the attitudinal problems of planning and planners.

The following tables for the years 1946, 1961, 1970 and 1980 extracted from the B.S.E. publication show that during total 34 years of post independence the number of Stock Exchanges have gone up from 5 to 8 only while the listed companies have grown from 1119 to 3172. The year 1946 figures show that what was inherited from the British rule in 1947. Therefore there is no full data available as in subsequent years of 1961 onwards. During these years Five Year Plans were announced one after another aiming at industrial growth without loosing the agriculture as the ba5;ic foundation. The attempts were made to disperse the industries into so called backward areas by announcing certain incentives. The Public Sector undeitakings were started where Private Sector was not able or allowed to enter.

It will be seen from the earlier table, that during these long 34 years since Independence till 1980, there was no development of industries and the capital market as compared to overseas markets. Again there was not

41 TABLE N0.11 PERIODICAL POSITION OF INDIAN STOCK EXCHANGES & LISTED CD'S

As on 318t Name of StocK No.of No.of f Paid-u p Value (Cr.Rs.) Market March Exchange Listed Cos. Stock Valued Issues of Capital Listed Equity Pref. Deb. Total (Cr. Rs.)

1946 Bombay 197 271 - - - 123 - Calcutta 576 807 - - - 147 - Madras 192 298 - - - 41 - Ahmedabad 81 82 - - - 15 - Delhi 73 92 - - - 73 - TOTAL 1119 1550 . . . 399 -

1961 Bombay 297 538 295 56 31 381 645 Calcutta 576 924 236 55 35 326 548 Madras 249 451 82 12 13 112 180 Ahmedabad 96 203 68 16 - 84 215 Delhi 103 198 68 16 . 85 127 Hyderabad 19 27 60 3 - 63 121 Madhya Pradesh 6 9 3 • • 3 5 TOTAL 1348 2350 812 158 79 1054 1841

1970 Bombay 580 1060 852 123 141 1116 1751 Calcutta 637 1075 556 75 90 721 1067 Madras 363 689 255 31 109 395 459 Ahmedabad 126 267 146 32 20 198 340 Delhi 174 332 178 40 28 246 386 Hyderabad 40 72 43 6 2 51 64 Madhya Pradesh 16 22 16 2 - 18 42 Bangalore 68 109 46 5 2 53 70 TOTAL 2004 3626 2092 314 392 2798 4179

1980 Bombay 992 1674 2114 145 671 2930 5421 Calcutta 891 1393 1232 105 136 1472 2797 Madras 398 644 635 37 117 788 1311 Ahmedabad 169 328 439 34 128 601 1352 Delhi 452 727 788 90 - 883 1943 Hyderabad 81 133 148 10 5 162 248 Madhya Pradesh 26 41 54 26 4 84 153 Bangalore 163 266 319 23 60 402 759 TOTAL 3172 5206 5729 470 1121 7322 13984

SOURCE: ' THE STOCK MARKET TODA Y BY BSE '

42 much industrial growth worth mentioning inspite of establishing pharmaceutical, petrochemical, heavy engineering industries, and other industries. Therefore in the next 20 years from 1961 to 1980 only one , stock exchange at Bangalore was added. The Listed Companies however grew from 1348 to 3172; while total market value of capital issued by these companies grew from Rs.l841 Crores to Rs. 13,984 Crores showing an increase of 659.59%. Similarly, the growth during the 10 years between 1970 and 1980 as is seen from the tables is not very impressive. Therefore we look into the next time span of 1985 to 1991.

II. ERA OF POST FERA AMENDMENTS OF 1985 - After Independence the planned economy was trying to look up though the growth was limited upto 1984. To regulate and control the Indian economy the Government brought amendments to the Foreign Exchange Regulation Act in 1984; which forced the foreign controlled companies like Colgate, Palmolive, Ciidbury India, Hindustan Lever, Pfizer, Glaxo Laboratories, Ciba Geigy etc. to dilute the ownership in fevour of Indian investors. There were even 100% owned subsidiaries of overseas companies apart from the units whose ownership was more than 60% / 70% or more was held by the overseas parent companies and the balance if any being held by a few handful large family investors. This did not qualify these companies under Securities Contracts (Regulation) Act, 1956 to get listed on the Stock Exchange/s. Under the FERA all these companies were forced to dilute

43 TABLE NO.12 THE STCX^K EXCHANGES AS ON 31.3.1993 AND 31.3.1994

As on 31st Name of Stock No.of No.of Paid-up Value (Cr.Rs.) Market March Exchange Listed Stock Valued Issues of Capital Listed Ec|Uity Pref, Deb. Total (Or. Rs.)

1993 Bombay 2903 5389 24527 96 18314 42937 210952 Calcutta 2475 3072 13874 80 4967 18921 111830 Delhi 2164 2795 20493 66 9367 29926 141954 Ahmedabad 1015 2052 12000 20 8051 20071 90651 Madras 748 1424 15036 63 5761 20860 101053 Hyderabad 274 340 8031 24 2174 10229 22964 Madhya Pradesh 140 166 1203 4 607 1814 9740 Bangalore 369 587 7672 24 5870 13566 68726 Pune 131 184 3269 9 1583 4851 34315 Cochin 92 130 1612 103 262 1977 37572 Ludhiana 185 221 1748 34 655 2437 11192 UP. 793 882 3516 11 5852 9379 28555 Guwahati 218 322 1638 1 993 2632 36902 Mangalore 28 47 2550 3 1442 3995 9898 Patna 30 39 741 2 603 1346 19785 Bhubaneshwar 33 45 1897 2 54 1953 4340 Rajkot 6 7 1472 0 6 1478 4218 Baroda 96 166 582 - 909 1490 12659 Jaipur 176 199 7310 0 0 7310 10635 All India 6925 11310 37029 241 19263 56533 252845 19

1994 Bombay 3585 7306 48609 143 26683 75653 398432 Calcutta 2673 3319 26356 87 7204 33647 214979 Delhi 2616 3180 40756 98 13608 54462 287061 Ahmedabad 1532 1861 g4488 31 26982 51501 142862 Madras 715 1040 18349 67 6330 24746 181525 Hyderabad 371 440 10572 66 1005 11643 38376 Madhya Pradesh 140 166 1203 4 607 1814 9740 Bangalore 393 605 18536 28 5800 24364 114982 Pune 131 184 3259 9 1583 4851 34315 Cochin 127 177 4204 33 4027 8264 64326 Ludhiana 222 258 3475 50 1000 4525 21550 U.P. 793 882 3516 11 5852 9379 28555 Guwahati 218 322 1638 1 993 2632 36902 Mangalore 29 42 2572 3 1306 3881 10321 Patna 46 62 2643 2 670 3315 10930 Bhubaneshwar 35 48 2064 1 224 2289 7060 Rajkot 26 30 2007 - 838 2845 4705 Baroda 95 114 582 - 909 1491 12659 Jaipur 299 335 13587 48 1518 15154 18869 OTCEI 24 24 38 - 6 44 196 20 All India 7811 12026 67006 323 85036 152322 541246

SOURCE:' THE STOCK EXCHANGE TODAY, BSE'

44 the overseas parental sharholding to be brought down below 40%. This shot in the arm gave the necessary shock treatment to Indian Capital Market. The so far inactive or sluggish capital market suddenly became very vibrant and active. This had a necessary impact of growth in Listed Companies, Number of equity / convertible bonds and of course the heavy growth in the Market Capitalization as can be seen from the two Tables of 1993 and 1994.

It will therefore be observed that all these steps resulted in substantial increase in the number of Stock Exchanges, listed companies, number of stocks issued and total market value of capital issued. The stock exchanges increased from just 8 in 1980 to 19 or 20 in 1993/1994. The listed issues increased from 5206 in 1980 to 11310 in 1993 showing an increase of 117.25%. The real jump was in the market capitalization at Rs.252845 crores in 1993 against Rs. 13984 crores in 1980 showing whopping 1708.10% increase. In 1994 the hsted companies frirther increased from 11310 in 1993 to 12026 in 1994, and the market capitalization increased to Rs.541246 crores in 1994 showing an increase of 114.06% in just one year. For the first time apart from individual stock exchanges the data of "All India" basis was also compiled and published by B.S.E. Bearing in mind the multiple listing of the big companies for the convenience of increasing Indian Investors, it will be observed that there was a quantum jump in all and every aspect of the Capital Market. It

45 will therefore be observed that the period of just 6/7 years upto 1991 created the desired and equally important, impact on capital market for promoting a very vibrant situation. By this time Indian Economy was also coming out of the dominance or influence of socialistic idealogies, to look at the developed Western Capitalist economies. Evan all East European leftist economies had started lookinj^ for changed environments to Western Market based developed economies. The Indian Economy also could not afford to remain in isolation to continue its approach of controlled or closed-door economy as was done in last 45 years. However, there were no major steps taken by Planners, Politicians or Bureaucrats to change the overall approach and take out the economy towards fast track of the growth.

Ill ERA OF LIBERALISATION OF THE ECONOMY - The time span in this era of hberalization under study is since 1991 to date. The span though short one is very important from various points of views. First and foremost important development was an effort by Dr.Manmohan Singh the then Finance Minister to open the doors of Indian economy to foreign investors by announcement of various measures of liberalization by doing away of restrictions for investments in Indian Corporates; allowing registered Foreign Institutional Investors (FIIs) to establish themselves in India, secondly legal and statutory changes were made. The era is also important for introduction and establishment of Securities And Exchange

46 Board Of India (SEBI) to regulate and monitor the growth of Capital Market, on the lines of Securities Exchange Commission in USA or UK, the Controller of Capital Issues was repealed. For the commencement of paperless trading system the On-Line Trading was started and the National Securities Depository Ltd. (NSDL) was established. The Government made amendments to some laws like Stamp Act etc., established the National Stock Exchange Limited (NSE). This vital short span is important also because of allowing Indian Corporates to tap foreign capital through Global Depository Receipts or Euro Convertible Bonds etc. which happens to be the topic of the present research.

In the true sense the Government realizing the need, after looking to the changing International scenario, took the bold decisions of slowly but cautiously integrating Indian economy with global economies. In other words it was a complete transition of Indian economy from controlled economy towards liberalized economy. These right steps in the right directions had resulted in changed scenario from almost dollarless foreign exchange reserves to respectable forex reserves of almost US $ 28 billion in just 5/6 years. The other long term benefit achieved by these changes was that world's most developed economies like USA Canada, Western Europ)e, Japan, Australia etc. have taken cognisance of the changed Indian economic weather. This resulted in opening up of Indian economy for joint ventures, foreign direct investments etc.

47 The dramatic changes had its impact on increasing market turnover of stocks substantially. It can be seen from the following Table No. 13 that there was respectable change in increasing number of listed companies. Their Equity Capital or Debentures and Bonds Capital also increased. From the Table No. 14 it could be seen that the total annual turnover of 1996-97 as will be seen has jumped by 248% compared to 1995-96 and by 345% compared to 1990-91 turnover.

THE STOCK MARKET TODAY The stock market activity in Inida is lagain concentrated in Mumbai with the National Stock Exchange and the Bombay Stock Exchange (BSE) getting the large volume of business on day to day operations in the secondary market. The total turnover in the BSE during January 1997 to April 1998 inclusive of specified shares, Bl & B2 Group and Debt Instruments was as follows >

48 TABLE No.13 THE INDIAN STOCK EXCHANGES AS ON 31ST MARCH, 1995

Exchanges Comp. Capital Listed (Cr.Rs.) Listed Debi Equity Bonds Pref. Total

Mumbai 5603 105284 32470 205 137959 Calcutta 3328 N.A. N.A. N.A. N.A. Delhi 3558 52995 9982 125 63102 Ahmedabad 2938 49432 18209 83 67724 ChennaJ 1714 41076 11283 35 52394 Hyderabad 727 17298 1143 78 18519 Madhya Pradesh 320 5022 1350 12 8384 Bangalore # 456 17441 6610 47 24098 Pune N.A. N.A. N.A. N.A. N.A. Cochin # 175 6224 2950 3 9177 Ludhiana 361 5577 0 0 5577 U.P. 840 12821 0 0 12821 Guwahati N.A. N.A. N.A. N.A. N.A. Mangalore 43 4441 1903 5 6349 Patna N.A. N.A. N.A. N.A. N.A. Bhubaneshwar 61 2372 0 0 2372 Baroda# 363 5705 721 0 6426 Jaipur 877 13795 1702 84 15581 Rajkot 156 3812 1361 0 5173 OTCEI 88 234 0 0 234 Coimbatore 192 1420 109 25 1564 NSE N.A. N.A. N.A. N.A. N.A.

All India 9730 159755 105520 523 265798

SOURCE:' THE STOCK EXCHANGE TODAY, 'sS£'

49 TABLENO.14

One way Turnover On BSE (only Purchase or Sale) (April - March)1990-91 to 1996-97

Month/Year 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97

April 2279 3732 7394 2946 3.502.96 2.024.72 7053 May 3370 3249 4643 5434 3.587.96 2.348.06 9156 June 3506 8477 2139 4541 7.691.82 4.280.05 1204 July 4737 5941 1467 3743 7.940.31 4.835.61 14863 AU£USt 5157 3864 3508 8502 5.964.69 4.149.40 7609 September 2105 8284 5814 6093 8.098.00 5.018.89 6248 October 3735 5630 4670 8612 8.830.99 4.656.80 8869 November 2383 6631 3283 7579 5.341.81 3.850.15 6595 December 4146 6425 2812 10.103 7.194.42 3,817.22 6558 January 1111 8760 1621 10646 2.944,76 4,324.74 16005 February 838 6475 3652 8251 3.087.18 6.746.32 12868 March 2653 6309 4693 8086 3.563.84 4,012.20 16422

TOTAL 36011 71777 45696 84536 67.748.74 50,064.16 124284

Monthly Avg. 3001 5981 3808 7045 5.645.73 4,172.01

SOURCE ;' THE STOCK EXCHANGE, BSE' 1

50 TABLE No.15 VOLUME OF TOTAL MONTHLY TURNOVER ON BSE

Turnover for Turnover tbemontli RctnCr. Rf.ln Bn. InUSS

1997 January 16005.16 160.05 4.46 February 12868.26 128.68 3.59 March 16421.90 164.22 4.57 April 12254.80 122.55 3.43 May 11438.77 114.39 3.20 June 18176.69 181.77 5.07 July 21226.83 212.27 5.94 August 18342.62 183.43 5.04 September 18910.79 189.11 5.23 October 16706.36 167.06 4.59 November 15326.41 153.26 3.97 December 18073.83 180.74 4.60

1998 Jamiary 17380.61 173.81 4.47 February 16496.77 164.97 4.20 March 23309.86 233.10 5.90 April 26683.82 266.84 6.72 1

Thus it will be seen that on month to month basis the turnover was consistently more than even the annual turnover upto 1985-86 and that of 1987-88. This shows that the capital market had started getting momentum and the investors, most of whom were and are the FIIs, have started taking interest very actively.

51 The BSE had started the computerization since 70's but it was more record keeping exercise and was only undertaken post completion of the transactions/settlement process. However, the authorities of the BSE including the great visionary Late Shri.Phiroze J.Jeejeebhoy took little more aggressive steps to chalk out the four phased computerization programme of the BSE and BSE brokers' operations. The programme covered back ofBce computerization of brokers' ofiQces and office of the exchange. Then there was regular training to all staff members, later on the direct connectivity of brokers' computers with those of the mainjframe computers of the exchange. Finally with addition of the latest imported hardwares there is recording of the transactions directly from Trade Works Stations (TWS) to main computers and to do the transactions on screen based computerized facilities. Thus the scripless / paperless trading system was conceived and implemented. The "BSE On Line Trading System" (BOLT) was started which has now been well stabilized. Therefore, now 'BOLT' is spreading its wings to neighbouring centres and other stock exchanges.

The secondary market therefore is gaininQ «!trength on day to day and month to month basis, by spreading of Trade Work Stations by both the stock exchanges of NSE and BSE through V Sat and BOLT. Though the Indian Stock Exchanges have not switched on to fully paperless trading system, the Indian Capital market is in the transition stage from

52 paperbased trading system to paperless trading system. This is now accelerated with the estabUshment and functioning of National Securities Depository Limited. The capital market today is fully computerized and Open Outcry System of trading in the trading hall is a matter of historical event. Today brokers can transact the business with the terminals installed in their offices with the help of latest software. The terminal of the broker displays the details of the shares offered and bided and with the coloured monitors it even conveys whether the market in general or the particular share of a company is going up or going down.

Besides this at the bottom of the terminal screen, one can get the latest position of BSE SENSEX updated every two minutes. There are plans now to extend the similar facility to other towns in India and in the neighbouring countries like Dubai etc. There are plans afoot of BSE to start their own depository shortly with the capital of about Rs.lOO crores. The development and preservation of detailed statistical records by BSE, it helps ministry of finance. New Delhi to answer various starred or unstarred questions raised in the Loksabha and the Rajyasabha by the members. This answering of the questions is instantaneously possible because of computerized net work.

Today with the imported advanced hardwares and softwares there is a distinct transparency and quickness in the operations of the market to the satisfjiction of National and International investors. 53