Article by EIH Researcher and Writer
Shamiksha Mallick
As a small kid, as soon as I opened one of the financial and market related TV channels like CNN, I used to come across a range of confusing numbers, graphs made in green and red with symbols that always perplexed my immature mind. Within those symbols and numbers, I often came across an abbreviation BSE. Now as an adult, though there is a lot that I still can’t track within those perplexing numbers, we do know what BSE is, and that too from a historical perspective.
The oldest of the stock exchanges in Asia, the Bombay Stock Exchange, in short known as the BSE is an Indian stock exchange established in 1875 by a cotton merchant named Premchand Roychand. Housed in Dalal street of Downtown Mumbai, what Wall Street is for the New York Stock Exchange, Dalal street is for the Bombay stock exchange.The street got its name when the stock exchange was moved there and it became the first stock exchange to be recognised by the Indian Government.The literal translation of Dalal in Marathi is a broker or an intermediary and thus the street got this name. The humble beginnings of the stock exchange can be traced back to the 1850s when five brokers used to assemble under the banyan tree in front of the Mumbai town hall. A decade later they shifted their adda to the banyan trees at the junction of the meadows street. As the number of brokers kept rising, they kept shifting their locations from one place to another. In 1874, they found a permanent location and in 1875, they formed an official organisation “The Native Share & Stock Brokers Association”. The present location of BSE was set up in 1928 and the building was constructed and occupied by 1930.
The BSE has been a centre to a number of accomplishments in the Indian finance sector and in the 1990s it also acquired the headlines because of 2 major incidents including the infamous scam 1992 and the 1993 bombay blasts. In the securities’ scam of 1992 that involved plotting within the stock market and using the loopholes within the banking system to his advantage, Harshad Mehta, a well known broker, was the mind behind this notorious scam. He manipulated the BSE along with a bunch of other brokers making it a scam of about Rs. 2000 – 4000 crores. He worked with bank employees to get fake bank receipts issued which he further used to take out loans from other banks under the impression that it was under government securities. He put this money in the stock market to raise the price of the shares by 4400 percent and then he sold these shares at a huge profit which he used to cover the principal amount of loans that he took from banks. He deceived the banks with a loss of 4000 crores and when this was discovered, the banks realised they were left with fake bank receipts which had no value. As the market kept rising, investors considered him as the ‘Big Bull’ and invested in the stocks that he had invested in. This incident inspired the 2020 Indian Thriller series Scam 1992 on SonyLIV which revolved around the mastermind of this scam and his subsequent downfall after he was caught. The other incident was that of the 1993 terrorist bombings in which a car bomb was exploded in the basement of the BSE building which not only damaged the main building but also affected the nearby office buildings leading to the unfortunate demise of around 50 people.
The BSE thus remains an important icon while discussing the financial history of India. Whether it’s the scam or the blast, or the achievements that it is credited for, it is a significant building that can not be excluded as far as the stock exchange market of India or the world is concerned.
REFERENCES:
Story of Harshad Mehta, financial frauds and the lessons that were never learned
Dalal Street
https://www.investopedia.com/terms/d/dalalstreet.asp
History and Milestones
https://www.bseindia.com/static/about/History_Milestones.html
From Banyan tree to BSE
https://mumbaimirror.indiatimes.com/from-banyan-tree-to-bse/articleshow/15996087.cms
