The history of the Indian stock market can be traced back to the 1850s when a group of 22 brokers would gather under a Banyan tree at Horniman circle in Mumbai to trade stocks of banks and cotton presses.
The American Civil war began in 1861. It led to a surge in demand for cotton, resulting in bullish speculation of cotton prices in India. In 1865, the war ended leading to India's first stock market crash.
By 1875, the group of brokers increased to 250. Together, they formed Asia's first stock exchange ‘The Native Share & Stockbrokers Association’, later renamed as the Bombay Stock Exchange (BSE).
In the 19th and early 20th centuries, stock exchanges were established in Ahmedabad, Kolkata and Chennai. Yet, the BSE remained India’s leading equity market due to its presence in Mumbai.
In 1956, the Government of India passed the Securities Contract Regulation Act, which formalised stock trading and recognised the BSE as the first stock exchange in the country.
Unit Trust of India (UTI) was established in 1963. It launched India’s first mutual fund scheme, the US64, which raised ₹6,400 crore by 1988.
In 1988, the Securities and Exchange Board of India (SEBI) to improve the transparency in the stock exchanges. However, it was only granted statutory powers in 1992.
In 1992, the National Stock Exchange (NSE) was established. In 1994, NSE became the first equity market in India to offer a fully automated screen-based electronic trading system.