Evolution of the Indian stock market.

Heraclitus, the Greek philosopher, once said, "The only constant in life is change." Yet when change happens, we are often surprised. I don't think it is the change that we are afraid of. Rather, we are afraid of giving up something that is comfortable in exchange for something that is uncomfortable. Whether you like it or not, things will keep changing and evolving, and we will have to find ways to get accustomed. More than the product or services provided by the business, what matters is their ability to adapt to change. India's economy as a whole has also been through a lot of changes. Likewise, the Indian stock markets have also evolved a lot. One of the biggest beneficiaries of this change has been retail investors. People like you and me. Some of these changes were necessary, some were like bitter medicine, and some were adopted to make life easy for crooks to con us. 

All in all, this history has been a fascinating journey, one that has made India one of the fifth-largest economies in the world. Let's look at some of these changes closely, in order to get more perspective. In the early beginnings of the Indian stock market, trading was far from what it is today. The concept of buying and selling shares in various companies was still relatively new and unfamiliar concept to most people. Post independence, India faced economic challenges, which led to the government's establishment if the Capital issues control act. This act aimed to regulate capital issues and ensure fair practices within the stock markets. 

Regulation was something that the Indian stock markets were lagging big time. BSE was established in the year 1875. Almost a decade later, the Indian government felt the need to establish a regulatory body that will play the role of a watch dog. Even though SEBI was established in the year 1988 as a watchdog, their powers was limited as they were a non-statutory body. Basically, good for nothing. It was after the Harshad Mehta scam, did the central government granted SEBI with statutory powers. Better late than never, SEBI did play an important role in regulating the Indian financial markets. Frauds kept happening but the pace was decreased, and crooks were penalized. 

Dematerialization of shares is one of the most desperately needed changes that came into action in 1996. The dematerialization of shares was a prominent factor that upscaled securities trading in India. Before that, trading was obscure. It was limited to the sharks in the sea. Today, in a matter of seven days, four companies are raising equity capital through IPOs. This wasn't the case earlier. Let me tell you how the IPO process took place in the past. After the IPO announcement, interested investors used to buy DRHPs. Imagine reading a few hundred pages about every single detail about the company for as long as they have been in business in a span of one week just to come to a conclusion that this IPO isn't worth our money. How exciting right? 

If the IPO was found attractive, investors used to apply for the IPO by filling a form that had anywhere between 12-16 pages. The next obstacle was the duration. IPO allotment and settlement took round about 35 days in the past. So, for 35 days, your capital was stuck. If I were you, I wouldn't have risked 35 days of blocked capital. As compared to the 90s, IPO application today is like order food from Zomato or Swiggy. You are just 3-4 clicks away from application. At the most, your capital remains blocked for 5 days. A true businessman or an investor knows the importance of blocked capital. Today, SEBI is working towards T+3 days of settlement for IPOs. From 35 days to 3 days, this change would be a GDP booster. 

The NSE and the regulator are also working towards changing delivery settlement days from T+2 to T+1. This change, if implemented will also help boost the national GDP. It will be a GDP booster because cash circulation will take place at a faster pace. Faster the cash moves, more churning takes place. Today, the Indian stock market has come a long way since its humble origins. With advancements in technology and increasing participation from domestic and foreign investors, it has become an integral part of the Indian economy, offering opportunities for wealth creation and investment growth. Started as an association of brokers, the BSE has also evolved into a full-fledged exchange, playing crucial role in the upliftment of SMEs and MSMEs.  

The year 2014 witnessed another milestone with SEBI's implementation of various reforms to promote transparency and protect investor interests. These measures included stricter regulations on insider trading, enhanced corporate governance norms, and greater disclosure requirements – all contributing to increased confidence among investors.

More recently, India's inclusion in global indices like the MSCI Emerging Markets Index has attracted substantial inflows from international funds. This recognition reflects not only India's growing stature but also signifies opportunities for domestic and foreign investors.

Each milestone in this journey shapes India's stock market. Continuous innovation is vital for its growth, addressing volatility, regulations, technology, and changing preferences. The story is ongoing, with each year bringing new opportunities and challenges. With a strong foundation and a growing economy, the future of India's stock market looks promising for investors. The stock market is driven by sentiments like how we behave in a given circumstance. The rise of the market post-COVID-19 is primarily due to an increase in business confidence in India and many other things driving positive change. Remaining invested is the only long-term strategy that we all need to be familiar with. Rest, the markets will take care of everything. Time in the markets is essential to timing the markets. 

Happy Investing.