India at 75: 20 milestones for Indian markets between 1995 and 2002

From the launch of the Nifty50 to the Ketan Parekh scam and the slump in the aftermath of the 9/11 terror attacks, here are the 20 biggest events for stock markets from 1995 to 2002

1.  March 14, 1995: The BSE On-Line Trading (BOLT) system is introduced as the BSE begins to lose market share to the NSE in the institutional and retail segments. It sets the pace for algorithm or computer-based trading, now a norm but revolutionary in those days. It ends the century-old open-cry method of price bids in the equity market, making the process of selling and buying shares faster and more transparent.

2. April 1995: India’s first Clearing Corporation, NSCCL (a wholly owned subsidiary of the NSE), is established. It shortens the settlement cycle and ensures that securities are delivered to buyers before the due date. This further enhances investor confidence in equity as a viable asset class in India.

 

3. July 1995: The Investor Protection Fund is established with the objective of compensating investors in the event of defaulters’ assets not being sufficient to meet the admitted claims of investors, and to promote investor education, awareness and research.

Also read: India at 75: 18 biggest moments for Indian markets from 1947 to 1993

4. October 1995: The NSE becomes India’s largest stock exchange. The trading volumes on it surpasses that on the BSE, demonstrating the success of electronic-based trading. It pushes the BSE to corporatise itself and adopt modern trading practices.

5. April 22, 1996: The Nifty50 index is launched. In the next few years, it would become the most tracked and traced index in India. Its popularity leads to the launch of exchange-traded fund (ETF), setting the stage for the ETF industry.

6. November 1996: The first depository of India, National Securities Depository Limited (NSDL), co-promoted by the NSE, is set up. NSDL kick-starts the process of digitisation of share certificates and other securities, eliminating another layer of complexity in ownership and sale of shares. It also lowers the cost of equity ownership.

7. 1997: The BSE’s BOLT system is expanded nationwide. This turns the BSE into a national stock exchange on the lines of the NSE, further boosting the culture of online share trading and investing.

8. October 11, 1999: The Sensex crosses the 5,000 mark for the first time, mainly on the back of the Bharatiya Janata Party (BJP)-led coalition winning a majority in the 13th Lok Sabha elections. This is the beginning of the dotcom boom in the market, which would end in a 2000 crash.

Read more: India at 75: 16 events that impacted Indian markets between 2003 and 2014

9. February 2000: Internet Trading on the NSE commences. This is the next step for the NSE electronic trading platform. This enables investors to trade and invest without having to go to a broker’s office/or call a broker in order to buy or sell shares.

10. March 2000: After a strong run of over 18 months, the Nasdaq peaks in March at over 5,000 level. Over the next 30-odd months, it would fall to around 1,100. Popularly known as the 2000 dot-com market collapse, it is triggered by global technology (internet economy) stocks and has a significant impact on the Indian stock market.

BSE

11. June 9, 2000: The BSE introduces Equity Derivatives. Trading in derivatives had nearly vanished on the BSE after the Sebi ban on badla trading. This is another attempt by the BSE to get a slice of the fast-growing, NSE-dominated derivatives trading market.

12. 2000: The Dividend restrictions Act is repealed. Companies are now free to distribute as much of their profits to shareholders by way of dividend as they wish. This sets the stage for a dividend boom in later years, with many cash-rich companies distributing nearly 90 per cent of their annual profits as dividend to investors.

Also read: India at 75: 12 landmarks for Indian markets between 2015 and 2020

13. March 1, 2001: The Union government proposes corporatisation of exchanges. The March 1, 2001, decision to organise stock exchanges into companies is meant to ensure a separation of ownership, management and trading rights. The new structure addresses the conflict-of-interest issue and also enables them to raise larger amounts of money needed for critical activities like modernisation and upgrade.

14. March 2001: The Ketan Parekh scam, the biggest after the Harshad Mehta scam, is unearthed. Mumbai-based stock broker Ketan Parekh is accused of rigging prices of certain securities, also known as K-10, between 1998 and 2001 using funds borrowed from banks. He is also accused of insider trading and teaming up with company directors to inflate stock prices. Sebi bans him and his associate companies from trading in stocks for 14 years.

15. April-May 2001: There is a large redemption in Unit Scheme-1964 (US-64) – Unit Trust of India’s biggest and most popular scheme. The stock market correction in the aftermath of the Ketan Parekh scam leads to redemption pressure on Unit Scheme 64 and a huge shortfall between what UTI owes shareholders and the mark-to-market value of the portfolio. There is panic when UTI places all redemptions on hold for six months and eventually has to be bailed out by the government.

16. July 9, 2001: Stock options are launched on the BSE. This allows investors to buy or sell stocks at a specific price within a specific date. The launch is the result of reports from two committees headed by L C Gupta and J R Varma, which laid the ground for regulatory framework for derivatives market in India.

17. September 9, 2001: A terror attack on the World Trade Center (WTC) in the US triggers a sharp fall in stock markets across the world, and India is no exception. Ten days after the attack, the global market meltdown leads to a sharp correction in the Indian markets. The Sensex falls 17.24 per cent on September 21, 2001, before recovering in about five months to touch a new high.

Also read: India at 75: 9 most important events for Indian market since 2021

18. November 1, 2001: Stock futures are launched on the BSE. After the J R Varma Committee suggested a methodology for risk containment measures related to derivatives trading, Sebi approves its launch. This is followed by the BSE introducing derivatives trading in the country in November 2001.

19. December 31, 2001: All securities turn to T+5 (trading plus five days) settlement cycle. The T+5 system means that purchases or sales are to be settled five working days later. In the weekly settlement system, the net position of the broker was settled by the clearing corporation at the end of the week, while in the rolling settlement system each trade is to be settled separately after five working days.

20. January 2002: ETFs are launched on the NSE. ETFs are a basket of securities that are traded on an exchange and have lower transaction cost. It starts on January 8, 2002, when the first ETF by Nippon India Mutual fund or the erstwhile Benchmark Asset Management Company is launched in India on the Nifty50 index.

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Contributed by Samie Modak, Krishna Kant, Ram Prasad Sahu and Sundar Sethuraman