BSE at 150: How a banyan tree grew into India’s $5 trillion stock market

At 150, the Bombay Stock Exchange at Dalal Street epitomises the financial pulse of the country. The 29-storey Phiroze Jeejeebhoy Towers in the downtown area of Dalal Street in Mumbai epitomise high-growth markets and digital finance.  However, the roots of Asia’s oldest exchange—and one of the largest by market capitalisation—are quite literal, with a banyan tree housing the earliest instances of trading, when a motley group of cotton traders would congregate under the leafy expanse of the tree in 19th-century Bombay, bartering and speculating on company shares. What began as an informal bazaar for native brokers would go on to become the BSE as it is known today.

In the 1850s, a handful of stockbrokers operated around the Town Hall in Bombay. As their numbers grew, they relocated in 1855 to under a banyan tree in front of Horniman Circle, a stone’s throw from what would become Mumbai’s financial district. By 1875, this group formally organised itself as “The Native Share & Stock Brokers’ Association”—led by businessman Premchand Roychand—establishing the foundation for what is now known as the BSE. This was 22 years before the Dow Jones Industrial Average came into existence, underscoring its pioneering role in Asia’s capital markets.

With the turn of the century and the rise of British-led industrial capitalism, the exchange evolved. By the early 1900s, the BSE moved to Dalal Street, a name now synonymous with India’s financial nerve centre. Throughout the British Raj, BSE’s fortunes were closely tied to imperial commerce — cotton, jute, railways, and finance. It established early linkages with global markets, particularly in London, although operations were frequently interrupted by wars and political upheavals.

The stock exchange witnessed major volatility during events like the Great Depression in 1929, when the crash of the Wall Street reverberated and reached the shores of Bombay. Despite India’s colonial status, its financial system—especially Bombay—was not insulated. The BSE saw a sharp fall in stock prices as panic spread. Prices of textiles, shipping, and plantation shares—then mainstays of Indian equities—tumbled. The depression caused a severe liquidity crunch; trading volumes shrank drastically, and investor confidence evaporated. British colonial authorities showed little interest in stabilising native financial institutions, exacerbating the uncertainty.

In 1939, following the outbreak of the Second World War, volatility again knocked on BSE’s doors, especially in the initial days of the war. However, war-driven demand later fuelled a speculative boom in commodities and stocks, especially in textiles and steel companies supplying to the war effort. The colonial government imposed wartime price controls, foreign exchange restrictions, and rationing—all of which complicated stock valuations and disrupted free trade. War-induced inflation impacted company fundamentals, while the constant threat of Japanese invasion—especially after the fall of Burma—spooked markets. Trading was occasionally disrupted due to blackouts, manpower shortages, and logistical challenges during bombing threats or political upheaval.

The war years also saw domestic upheaval. During the peak of the Quit India Movement, especially in August 1942, the BSE was forced to temporarily shut down amid widespread protests, civil disobedience, and colonial crackdowns. Investors became extremely cautious as the possibility of a power vacuum loomed, creating a de facto “political risk premium” on Indian stocks. With many nationalist leaders imprisoned and administrative functioning disrupted, regulatory oversight weakened, and trading became sporadic and sentiment-driven.

After India declared independence from Britain, the BSE played a pivotal role in funding industrial expansion and private enterprise under a mixed economic regime. Although the Indian economy remained largely protectionist, the capital markets matured steadily. In 1957, the BSE was formally recognised as a stock exchange under the Securities Contracts (Regulation) Act, 1956, granting it legal status and reinforcing its role as a cornerstone of Indian finance. However, operations remained largely manual, opaque, and club-like, often criticised for a lack of transparency and investor protection, setting the stage for future reform.

When liberalisation, privatisation, and globalisation reforms swept India in 1991, it was a watershed moment for the BSE as well. As foreign capital flowed in and new companies went public, the limitations of the old trading floor became apparent. Barely a year after the reforms, however, the exchange was rocked by the Harshad Mehta securities scam, when the stockbroker exploited loopholes in the Indian banking system to divert funds into the stock market. After the scam was unearthed, the market crashed, wiping out investor wealth. Banks, such as the State Bank of India and the National Housing Bank, were found to be entangled in the scandal. Investor confidence in the stock market was severely shaken.

The scam paved the way for sweeping reforms in the way shares were traded in India. The Securities and Exchange Board of India (Sebi) was granted statutory powers in 1992, allowing it to regulate the securities market more effectively. Sebi became the central regulatory authority for capital markets. Manual, floor-based trading gave way to screen-based electronic trading, which improved transparency and efficiency. The National Stock Exchange (NSE) was set up in 1994 as a fully automated, demutualised exchange to compete with and reform the BSE. Physical share certificates were replaced with dematerialised (demat) shares to prevent forgery and simplify ownership tracking. The National Securities Depository Limited (NSDL) was established in 1996. By 1995, BSE adopted full electronic trading through its BOLT (BSE Online Trading) system, marking its transition into a modern exchange.

On March 12, 1993, BSE’s building on Dalal Street became one of the prime targets in a coordinated series of 12 bomb blasts that rocked Mumbai, in what remains one of the deadliest terrorist attacks in India’s history. A powerful car bomb exploded in the basement garage of the BSE building at 1:25 p.m., killing over 50 people and injuring more than 200, while causing extensive structural damage to the exchange and surrounding areas. The attack was orchestrated by the D-Company under Dawood Ibrahim, allegedly in retaliation for the communal riots that had gripped Mumbai earlier. The blast not only crippled trading operations temporarily but also sent shockwaves through India’s financial and political systems. Despite the devastation, the BSE quickly resumed operations, symbolising the resilience of India’s financial sector in the face of terror.

For most of its history, the BSE functioned as a mutual organisation, owned and run by brokers. But with the rise of global best practices and competing exchanges, it needed to change. In 2005, the BSE began its corporatisation journey, and by 2007, it was demutualised, bringing in outside shareholders and separating ownership from management. Deutsche Börse and the Singapore Exchange later acquired minority stakes, integrating the BSE further into the global financial ecosystem. The BSE also expanded its product portfolio to include equity derivatives, debt instruments, mutual funds, and currency futures, and launched SME and startup platforms to cater to India’s growing entrepreneurial economy.

On February 3, 2017, the BSE itself got listed on its platform — a rare milestone in global exchange history. The IPO was oversubscribed 51 times, reflecting strong investor trust. Today, BSE Ltd. is a listed company with the ticker: 538976, governed by a professional board, and regulated by the Securities and Exchange Board of India (Sebi). In the era of fintech and instant settlements, BSE is aligning itself with India’s digital-first vision. It has played a key role in expanding retail participation, integrating UPI for IPO payments, and supporting initiatives such as T+1 rolling settlement, which enables stock trading to be nearly real-time.

Through its platforms, such as BSE StAR MF (mutual funds) and BSE SME, the exchange is enabling wider capital market access across India’s Tier 2 and Tier 3 cities. BSE has also ventured into international financial services through its subsidiary, India INX, which operates out of GIFT City, Gujarat —India’s first International Financial Services Centre (IFSC).

Today, the BSE is not just a marketplace; it is a symbol of India’s financial resilience and transformation. From banyan trees to blockchain, its journey mirrors the evolution of the Indian economy itself. With over 5,800 listed companies and a market capitalisation that has surpassed $5 trillion, the BSE stands as a testament to India’s depth in the capital market and investor confidence. As India aims to become a $5 trillion economy, the BSE—now nearly 150 years old—remains more relevant than ever.