Bombay Stock Exchange

BSE Limited (also known as the Bombay Stock Exchange) is one of India’s two main marketplaces for the sale of stocks and other securities, the other being the National Stock Exchange (NSE). Founded in 1875, the BSE is the oldest exchange in Asia. With nearly 5,700 companies traded, it is also one of the largest exchanges in the world by number of listed companies. As of May 2025, the total market capitalization of all the companies listed on the BSE stood at more than $5 trillion.

Various financial products are traded on the BSE, including stocks, bonds, and derivatives. It owns and maintains the Sensex, one of two benchmark stock market indexes in the country.

From banyan tree to stock exchange

Trading activity in Bombay (now Mumbai) dates back to the 1830s, when a small group of brokers began dealing in bank shares and East India Company securities under a banyan tree near the Town Hall (now Horniman Circle).

The number of brokers in the city ballooned during a short-lived financial bubble from 1861 to 1865. The surge was driven by speculation on rising cotton prices, as European mills faced shortages caused by the Confederacy’s decision to withhold exports from the American South during the American Civil War.

In 1875, the brokers organized into an informal association called the Native Share & Stock Brokers’ Association, with influential bullion and cotton broker Premchand Roychand as one of the founding members. The association was formalized in 1887 as a member-run nonprofit and later became known as the Bombay Stock Exchange. It set up its trading floor on what is now Dalal Street (Hindi: broker’s street), which has since become a metonym for Indian financial markets.

Until almost a decade after Indian independence from British rule in 1947, the BSE and other rival exchanges that had sprung up across the country were largely self-regulated and followed their own rules and bylaws, despite periodic attempts by provincial and colonial governments to impose oversight.

The Securities Contracts (Regulation) Act of 1956 allowed the central government to recognize and regulate exchanges and capital markets in the country. Still, with no dedicated regulator or comprehensive market oversight, investors remained vulnerable to fraud, insider trading, and other types of manipulation as markets evolved over the decades. Further, much of the market was still opaque, with paper-based systems, limited disclosure, and uneven enforcement letting questionable practices continue until reforms were implemented in the 1990s.

The BSE was the first exchange to be recognized under the 1956 law. It remained the most dominant bourse in the country until the mid 1990s, although heavy state control kept the Indian capital market relatively small and underdeveloped for most of this period.

Disruption in the 1990s

The 1990s, a decade of economic liberalization in the country, were marked by major market-oriented reforms that loosened the government’s grip on the flow of capital and opened the door to foreign investment, fueling a wave of market enthusiasm and speculation. But that euphoria was shaken in 1992 when a massive securities scam, orchestrated by broker Harshad Mehta, led to hefty losses for retail investors and banks and exposed serious flaws in the financial system. The scandal prompted the strengthening of the Securities and Exchange Board of India (SEBI), which had been founded in 1988 and was granted statutory powers in 1992.

The SEBI instituted a number of changes over the next decade, including stricter disclosure rules, shorter settlement cycles, digitized securities, and circuit breakers, to improve risk management, foster transparency, and curb market manipulation.

In a further step toward more reliable and efficient markets, the NSE was set up in 1992—with encouragement from the government—and began operations in 1994 as a modern, more transparent alternative to the BSE. Unlike the BSE, which was controlled by the same brokers who traded on its floors, the NSE was owned by a group of financial institutions that held ownership stakes in the exchange.

NSE introduced a computerized trading and digitized securities, quickly eclipsing the BSE’s age-old open outcry system, where brokers used hand gestures to haggle over the prices of paper securities in a noisy and chaotic trading ring. In response, the BSE launched its own electronic trading system, BSE On-Line Trading (BOLT), in 1995 and expanded its services beyond Mumbai. Still, its market share and total transaction value shrank rapidly with the arrival of its faster, more efficient competitor. By the late 2010s, the NSE controlled more than 90% of India’s equity trading volumes, firmly establishing itself as the country’s leading exchange.

The NSE also came to dominate equity derivatives—futures and options—which have become one of the biggest and most lucrative markets for Indian exchanges since their introduction in the 1990s.

Transition to a modern exchange

The BSE underwent a major overhaul of its corporate structure in 2007, shifting from a broker-owned association to a shareholder-owned, for-profit company. The change was part of a government-mandated process called demutualization, intended to break brokers’ control over exchanges and improve corporate governance.

Soon after, institutional investors such as the Life Insurance Corporation of India, Singapore Exchange, and Deutsche Börse became some of the biggest shareholders of the company. The BSE went public in 2017, raising ₹12.43 billion ($186 million) in its initial public offering. Since then, the BSE has focused on reducing transaction costs and increasing trade execution speed to increase trading volume. Because Indian rules prohibit exchanges from listing their own shares, BSE stock is listed on the NSE.

Today, the BSE still lags the NSE by volume and liquidity (the availability of buyers and sellers willing to make trades), but it does lead the market in some segments, such as offers-for-sale (an instrument through which existing shareholders sell their shares to the public) and exchange-traded mutual funds. The BSE also lists a number of smaller stocks that may not meet the NSE’s stricter listing criteria.