Growth of Stock exchange | Pre vs Post Independence

The Growth of Stock Exchange in India can be analyzed in two ways,

  1. Pre Independence period, and;
  2. Post Independence period.

Growth of Stock exchange in the pre Independence period

Before independence, there was no proper stock exchange in India. In the pre independence period, there were only three stock exchanges, namely, Bombay Stock Exchange, 1877, Ahmedabad Stock Exchange, 1894 and Calcutta Stock Exchange, 1908.

Why were stock exchanges in India not popular before Independence?

Due to the following reasons, the stock exchange prior to independence was not popular.

1. The Britishers showed more interest in the growth of companies in London.

2. The managing agency system prevailing in the country was not very reliable.

3. There was no proper information about the market prevailing in different parts of the country.

4. The number of companies were also very limited.

5. There was no specialized institution or agency to guide the public for promoting investments.

6. Public were more interested in investing in gold than in company securities.

Growth of Stock exchange in the Post Independence Period:

Since 1951, there has been a steady growth of Indian capital market. In order to strengthen the capital market, two important Acts were passed, namely, Indian Companies Act 1956 and Securities (Contract and Regulation) Act 1956. The Government had taken a number of measures to promote more joint stock companies. The interest of investors was also safeguarded by the passing of the above mentioned Acts. 19 stock exchanges were recognized by 1956 and in the primary market, enormous amount of capital raised.

However, after 1995, the expansion of capital market slowed down. The creation of more public sector undertakings and the nationalization of Life Insurance Corporation were responsible for the supply of huge amount of funds in the capital market.