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What is Bombay Stock Exchange (BSE) ?

February 2, 2018 By Mayank Mishra

 

A stock exchange is the base of whole stock market eco-system. It is the main reason, stock market eco-system exists, breathes and remains healthy. Bombay stock exchange is the oldest stock exchange in India. It started evolving much before freedom fights in India erupted against East India Company. Yes! BSE does have a very interesting trail, to exclaim wow. Come along with FundsBase and walk through this exceptional journey to know what is Bombay Stock Exchange (BSE).

Article Content

  • What is Bombay Stock Exchange
  • BSE timings
  • BSE Address
  • BSE trading platform
  • BSE Index
    • S&P BSE SENSEX Calculation
    • Companies in S&P BSE SENSEX
  • Group Companies of BSE
  • Summarizing

 



Stock market has seen a huge uptrend in trader/investor participation in last couple of years. Major credit goes to SEBI, who brought transparency and innovations to the system by enforcing bye-laws to financial intermediaries and addressing investor’s grievances.  

A stock exchange is the base of stock market eco-system. BSE Ltd. (formerly known as Bombay Stock Exchange Ltd.) took the initiative to organize brokers and holds the crown to be the first stock exchange in Asia. 

what is bse

What is Bombay Stock Exchange

Tracing stock market back to 19th century, it didn’t actually exist as an organized system. It was East India Company who, in late 18th century started trading loan securities. Gradually by mid- 1850, a group of Indians used to meet and trade under a banyan tree, opposite Town Hall of Bombay. Brokers of this small trading group expanded and reached to 250. Due to the increasing number of the member, it was required to have some rules/guidelines and a well-established system. Thus, on 09 July 1875, this group established itself as “The Native Share and Stock brokers Association” and started functioning in more organized manner. On 31 August 1957, Union Government of India recognized BSE as the first stock exchange of India under the Securities Contracts Regulation Act. SEBI regulates BSE, just like it regulates any other financial intermediary.

In below image, you can have a glimpse of the incredible BSE timeline journey so far.

BSE timeline journey
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BSE timings

BSE opens at 09:15 and closes at 15:30. There is a 15-minute pre-market session from 09:00 to 09:15. This pre-market session is provided to settle-down any over-excited market sentiments, resulted by any overnight news. You can know more about pre-market session.  

Apart from this everyday timing, BSE is closed on weekends and the declared holidays for the financial year.

See Stock Market Holiday for year 2021

 

BSE Address

Phiroze Jeejeebhoy Towers 
Dalal Street
Mumbai- 400001
BSE contact number – 022-6136 3100

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BSE trading platform

BSE was functioning as a floor trading exchange, where trades were performed by shouting trades prices on a floor in the exchange. Technology development, more client base and the arrival of a competitor NSE with the electronic trading platform, led BSE to adopt the digital platform. In 1995, BSE switched to electronic trading platform developed by CMC Ltd. This trading platform is called BSE On-Line Trading (BOLT).

BSE is the fastest stock exchange in the world with the speed of 6 microseconds.

BSE Index

Currently, there are around 5788 companies listed on BSE. This figure keeps on changing as some companies get listed and some de-listed. 

An index of a stock exchange represents the amount of liquidity and market sentiments at a glance. This index is compiled by choosing some scrips who fulfil the criteria for the index. BSE index is called S&P BSE SENSEX. 

S&P BSE SENSEX is compiled by choosing 30 (currently 31) BSE listed companies from various sectors. It was first introduced in 1986 using Market Capitalization-Weighted methodology. The base year of S&P BSE SENSEX was taken as 1978-79. Since September 1, 2003, S&P BSE SENSEX is being calculated on a Free-Float Market Capitalization methodology. It is the oldest index in the country thus provides time series data over a fairly long period of time (from 1979 onwards).
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S&P BSE SENSEX Calculation

S&P BSE SENSEX is calculated using the ‘Free-float Market Capitalization’ methodology. In this methodology, the index at any point of time reflects the free-float market value of chosen scrips relative to a base period.

This base period year is 1978 – 1979. Base value for this period is 100 index point.

The market capitalization of a company is determined by multiplying its stock price by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization.

To calculate the S&P BSE SENSEX, the free-float market capitalization of 30 (currently 31) chosen companies of S&P BSE SENSEX index, is divided by a number. This number is called Index Divisor. This Index Divisor links to the original base (100), calculated during the period 1978-79. This divisor is the only key which enables historical index comparisons. 

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Companies in S&P BSE SENSEX

As of December 2017, S&P BSE SENSEX is calculated using 31 companies. Tata Motors has two stocks on this list.

Sl Company
1 Adani Ports & SEZ
2 Asian Paints
3 Axis Bank
4 Bajaj Auto
5 Bharti Airtel
6 Coal India
7 Dr. Reddy’s Laboratories
8 HDFC Bank
9 Hero MotoCorp
10 Hindustan Unilever
11 Housing Development Finance Corporation
12 ICICI Bank
13 IndusInd Bank
14 Infosys
15 ITC
16 Kotak Mahindra Bank
17 Larsen & Toubro
18 Mahindra & Mahindra
19 Maruti Suzuki
20 NTPC
21 Oil and Natural Gas Corporation
22 Power Grid Corporation of India
23 Reliance Industries
24 State Bank of India
25 Sun Pharmaceutical
26 Tata Consultancy Services
27 Tata Motors
28 Tata Motors DVR
29 Tata Steel
30 Wipro
31 Yes Bank

 
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Group Companies of BSE

BSE, apart from being a stock exchange has some group companies for various purposes. Let’s have a look at them.

  1. BSE Institute Ltd
  2. BSE Ltd. apart from being a financially active corporate entity has introduced a financial education platform called BSE Institute Ltd. It is a wholly owned subsidiary of BSE. Its main focus is to transfer the knowledge, technology and experience acquired by BSE, to the new generation. Its headquarter is located on Dalal Street, Mumbai.

  3. CDSL
  4. In 1996 shares were dematerialized and this dematerialized format is called DEMAT. These demat shares require an electronic place to be saved at. A depository is a financial intermediary, which provides this electronic platform to save the demat (dematerialized) shares.

    Central Depository Services (India) Limited (CDSL), is one of the depositories in India. CDSL received the certificate of commencement of business from SEBI in February, 1999. It was initially promoted by BSE Ltd. which has thereafter divested its stake to leading banks as “Sponsors” of CDSL.

  5. ICCL
  6. ICCL is a wholly owned clearing corporation of BSE Ltd. It was established in 2007. A clearing corporation makes sure that every trade is closed successfully. Means, if there is a buyer who buys some shares at Rs x, there should be a seller selling the same amount of shares at Rs x.

    ICCL carries out the functions of clearing, settlement, collateral management and risk management for various segments of BSE.

  7. India INX
  8. India INX is the abbreviation of India INternational eXchange. It is country’s first International Exchange at the international financial services centre (IFSC) GIFT city Gandhinagar. Indian INX is wholly owned by BSE Ltd. India INX got final approval of SEBI on December 30, 2016. It operates for 22 hours a day to allow international investors and Non-Resident Indians to trade from anywhere across the globe.

  9. India ICC
  10. India ICC is the abbreviation of India International Clearing Corporation. It was promoted by BSE Ltd to be the first international clearing corporation at GIFT city Gandhinagar. Currently, it is providing clearing & settlement, risk management and collateral management services to India INX. It started operations on 16 January 2017.

  11. Marketplace Technologies
  12. Marketplace Technologies Pvt. Ltd. facilitates e-enabling businesses in banking, commodities and financial sector. It has a team of 70 professionals who provide development and support to its clients.

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Summarizing

BSE, started by just 250 people in 1875 has gone through various ups and downs and achieved several milestones till yet. It has not just survived but is one of the leading stock exchange in India. It is the fastest exchange in the world with speed of 6 microseconds.

Due to its innovative approaches, it has introduced various phenomena, copied by others later. S&P BSE SENSEX introduced in 1986, is one of the reliable exchange indexes in the world and reflects India’s economical growth. Recently it has established India INX, India’s first International Exchange.

 
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Filed Under: Stock Market

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