Updated Feb 20, 2022

What is Bombay Stock Exchange (BSE)?

What is BSE

Introduction

The Bombay Stock Exchange is the official name of BSE. With a history dating back to 1875, the BSE is the oldest Asian stock exchange and was the first in India to be recognised by the government as such under the Securities Contract (Regulation) Act of 1957. Since then, it has played an essential role in the growth of the country's capital market.

History of BSE

• The Bombay Stock Exchange, commonly known as the Stock Exchange Mumbai, was founded in the year 1875 and is located in Mumbai, India. Prior to establishing the BSE, a group of five stockbrokers used to have their various meetings in front of the Mumbai town hall beneath a banyan tree.

• Over time, however, the number of brokers attending the meeting grows gradually. As a result of this growth, the location of the meeting used to change on a regular basis. After a few decades, in 1874, the group of brokers relocated their meetings to Dalal Street and established it as their permanent venue.

• It was renamed the Native Shares and Stock Broker's Association the next year, giving it the status of an official organisation for the first time in its history. After many decades of operation, it was recognised as India's first stock exchange in 1957 under the Securities Contracts (Regulation) Act, which the Indian government passed.

• After the Bombay stock exchange acquired popularity in 1986, SENSEX was formed as a stock market index of 30 well-established and financially stable firms listed on the Bombay stock exchange. The SENSEX stock market index measures the Bombay stock exchange's overall performance.

• The Bombay Stock Exchange (BSE) made the changeover to an electronic trading system known as the BOLT system in 1995. (BSE On-Line Trading). On the other hand, it was the first stock exchange in the world to deploy a centralised internet trading system, making it the first stock exchange in the world.

Features

The following characteristics distinguish the Bombay Stock Exchange:

• It is the biggest and the first securities market in India, and it is situated in the Indian city of Mumbai. Stocks, stock options, stock futures, index options, index futures, and weekly options are some of the financial instruments that are traded on the BSE market.

• The Bombay Stock Exchange's benchmark index, the SENSEX, comprises 30 businesses that are financially strong and well established from roughly 12 various sectors, and it serves as a barometer for the overall performance of the Bombay Stock Exchange as a whole.

• It has contributed to the development of India's capital market as well as the expansion of the country's business sector.

Importance of BSE

The Bombay Stock Exchange is particularly significant for the reasons listed below:

• In the financial market, it is simple to sell and purchase securities at any time.

• The BSE will list the securities if it meets the liquidity requirements of prospective investors.

• Due to the fact that the BSE is a trustworthy source through which the securities are exchanged in the financial market, it is simple to obtain cash by issuing equity and debt securities via it.

• They give a free and open venue for speculation inside a legally sanctioned environment. BSE is the ideal venue for healthy speculative trading, and it helps investors meet their need for liquidity by providing them with a liquid investment vehicle.

Benefits of BSE

The following are some of the advantages of trading on the Bombay Stock Exchange:

• The SEBI governs the functions of the BSE. As a result, all transactions that take place on the Bombay Stock Exchanges are strictly regulated and governed within the legal framework. As a result, it provides investors with the certainty that they are dealing in a secure environment and that their money will not be squandered.

• They educate the public on the advantages of participating in the stock market and guarantee that all transactions are carried out smoothly and efficiently.

• It is possible for investors to use the securities listed on it as collateral when taking out loans from banks and other financial institutions.

Conclusion

The Bombay Stock Exchange is referred to by its acronym, which is BSE. As its name says, it is the stock exchange that was formed in the year 1875. The benchmark index of the Bombay Stock Exchange is the SENSEX, which is composed of 30 firms that are financially strong and well-established, and it is used to gauge the overall performance of the Bombay Stock Exchange.

The transactions that take place at the BSE are highly controlled and managed within the legal framework since India's securities exchange board oversees the exchange's operations. The foundation for conjecture is therefore created, albeit within the confines of the law.