The History of Trading in India

Trading in India has been around for more than a century in India, since the colonial times. But trading as we know it today and trading for our ancestors is wildly different from each other. Let us find out how.

When Did Trading in India Start?

Trading in India began in the year 1840s, when incorporated companies started arriving in the country. Securities at the time were sold and bought at such exorbitant prices that only the British or extremely wealthy Indians could ever hold them.

The first stock market boom happened in India at the beginning of the American Civil War with the British supply of cotton stopping from America, making India the next best supply line by default. This increased production and value of the manufacturers in India, and in turn the value of their securities in the market.

However, this boom came to an end just as soon with the end of the American Civil War, and became the cause of the first crash of the Indian stock market as well. Independent brokers were used for trading in India, which made the stock market volatile to begin with. But after the crash, the situation became much worse and it was decided that an organisation was essential in order to regularise trading in India and maintain a balance in the stock market.

Regularisation of Trading in India

The British government established the Bombay Stock Exchange (BSE) in 1875. The Bombay Stock Exchange Academy was founded alongside it in the same year to train a new crop of traders and brokers in India.

While the Bombay Stock Exchange has been around for more than a century now, the BSE Sensex was only created in 1986. Which means that for 106 years, there was no singular method of measuring the average price of securities and their flow in the market. Not only that, but trading through an electronic system did not begin in India until 1994.

So, how did trading in India take place then?

Trading in India Before Computers

The success of any trade is dependent on the accuracy of the available data on securities in the stock market, and on how fast the data can be delivered to the traders and executed by them. In the 21^st Century, this speed and accuracy is made possible by really powerful centralised computers. But how did trading in India happen before computers then?

Trading in securities before the advent of computers was a long, drawn-out process. Most stock exchanges in the world, starting with the British one, switched over to an electronic trading system after 1985. But before that, everything trading related was a manual process and thus required significant investment and manpower to even become a trader.

The movement of price and securities would be sent over to stock broking firms by the stock exchange, which would be then converted into a usable graph.

All the graphs which tracked the up and down of securities and the general flow of the market were hand drawn. Each change in price was painstakingly recorded. This data was then sent over via telephone to the stock exchange. There, a representative of the trader would loudly declare the buy or sell order and it would be processed.

This method of shouting and declaring your order is known as the Open Outcry Method, and was quite prevalent for most of the history of trading in India.

Nowadays, we have more than a dozen stock exchanges in India. Even the electronic trading platforms are more streamlined and simplified, making it possible for the average person to engage in trading.

Through this article, we hope that we were able to inform you about the rich history of trading in India, and to inspire you by giving you a glimpse into all the work which was put in to create the trading system in India currently in use.

If you wish to learn more about the stock market, trading strategies, risk management, etc., in greater detail, you will find the relevant articles on the Booming Bulls Academy blog.

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