What is BSE - Bombay Stock Exchange in India

The Bombay Stock Exchange (BSE) is one of the most prominent financial institutions and the oldest stock exchange in India. It offers a transparent and efficient platform for trading in equities, currencies, debt instruments, derivatives, and mutual funds.

BSE was established in 1875 in Mumbai as the Native Share and Stock Brokers’ Association and has grown into a cornerstone of the Indian financial system. It has been shaping India’s economic journey for over a century by becoming a key pillar of our capital market, facilitating trading and investments, and supporting companies.

Coming to BSE’s flagship index, the BSE SENSEX is India’s most tracked market benchmark and is also traded globally on EUREX and major BRICS (Brazil, Russia, India, China, and South Africa) exchanges.

In this article, we will explore BSE’s meaning, features, objectives, functions, and more. So, let’s dive in.

Key Features of BSE

The Bombay Stock Exchange stands out for several major features that make it a trusted and efficient marketplace for investors and companies. Such key features of BSE are highlighted below. 

• Trading Platform:  

The BSE functions as a central hub for trading shares of publicly listed Indian companies. Within designated market hours, investors can buy and sell equities, which makes the BSE platform a vital component of the country’s capital market ecosystem. 

• Company Listings: 

BSE facilitates the public listing of companies by supporting capital-raising methods such as  Initial Public Offerings (IPOs) and Follow-on Public Offerings (FPOs). This allows businesses to raise funds by offering shares to investors and gaining access to the public market. 

• Financial Instruments: 

In BSE, individuals are given a choice of investing and trading in various financial instruments, such as equities, debt, derivatives, indices, currency derivatives, interest rate derivatives, ETFs, and mutual funds. 

• Commodity Derivatives: 

In addition to various financial instruments, BSE offers a platform for trading commodity-based derivatives, including precious metals like gold and silver, as well as agricultural products, which provide investors with diversified trading opportunities. 

• Compliance and Governance: 

Functioning under the oversight of the Securities and Exchange Board of India (SEBI), BSE upholds market fairness and investor protection. It ensures that the participants comply with predefined rules regarding listings, trading practices, and disclosures, which thereby promotes trust and ethical conduct across the marketplace. 

• Benchmark Indices:

The BSE is widely recognised for its market indices, especially the SENSEX (Sensitive Index), which reflects the overall performance of a selected group of top-performing companies. This SENSEX acts as a key indicator not only within the country but also for global investors and financial experts. 

History and Milestones of BSE

Founded in 1875, BSE holds the distinction of being the oldest stock exchange in India and Asia as well. It was the first in India to receive permanent recognition under the Securities Contracts (Regulation) Act of 1956. Over the past 150 years, it has evolved significantly, playing a vital role in shaping the Indian securities market. 

The story of BSE’s growth mirrors the dynamic history of India’s financial markets. Here are some of the major milestones that have marked its remarkable journey. 

• 1875- The Native Share and Stock Brokers’ Association was established. 

• 1957- BSE was granted permanent recognition under the Securities Contracts (Regulations) Act (SCRA). 

• 1986- India’s first equity index, the S&P BSE SENSEX, was launched with a base year of 1978-79 and a base value of  100.

• 1992- The SEBI Act was established to protect, develop, and regulate the securities market. 

• 1995- The BSE On-Line Trading (BOLT) system was introduced, revolutionizing electronic institutions. 

• 1999- The Central Depository Services Ltd. (CDSL) was set up in collaboration with other financial institutions. Furthermore, Interest Rate Swaps (IRS) and Forward Rate Agreements (FRA) were allowed to enhance the derivatives market. 

• 2000- Equity derivatives were introduced, marking a significant step in financial innovation. 

• 2001- BSE Webx was launched along with index options, stock options, and stock futures. Additionally, the Value at Risk (VaR) model was introduced for margin requirement calculations. 

• 2003- India’s first Exchange Traded Fund (ETF) on the S&P BSE SENSEX, named ‘SPICE’, was introduced. 

• 2005- The Bombay Stock Exchange was incorporated as a corporate entity, becoming Bombay Stock Exchange Limited. 

• 2006- The iShares S&P BSE SENSEX India Tracker was listed on the Hong Kong Stock Exchange, increasing global reach. 

• 2008- The currency derivatives were introduced, expanding product offerings. 

• 2009- BSE launched FASTRADE, a new market access platform, along with the BSE StAR MF platform for mutual fund trading. 

• 2010- Options trading was introduced on BOLT, mobile-based trading was launched, and Systematic Investment Plans (SIPs) were made available.

• 2014- BSE launched the currency derivatives exchange (BSE DCX), interest rate futures (BSE IRF), along with the Institutional Trading Platform under BSE SME, and a new debt segment. 

• 2016- Trading in Sovereign Gold Bonds commenced on BSE, diversifying investment options. 

• 2017- BSE became India’s first listed stock exchange, marking a historic milestone. 

• 2018- The cross-currency derivatives and cross INR options were launched by BSE. In the same year, a chatbot named ‘Ask Motabhai’ was introduced, along with ‘BSE Startups’, which is a platform for startup listing. It also initiated its commodity derivatives segment and became India’s first universal exchange. 

• 2019- India’s first exchange-traded interest rate options were launched by BSE.

• 2021- BSE and SEBI, together, launch a web portal called Innovation Sandbox. 

• 2022- The launch of the KYC Registration Agency (KYC KRA) was announced by BSE Technologies Pvt Ltd. 

How Does BSE Work

The Bombay Stock Exchange operates on an entirely online basis and is regulated by the Securities and Exchange Board of India. Here, the trading takes place through BSE’s electronic platform (BOLT), where investors can place orders either directly via the Direct Market Access (DMA) system or through registered brokers. The DMA system tracks the overall value of trades rather than focusing on individual buyers or sellers. 

Most of the investors trade through brokers or brokerage firms that access the system via their own terminals and charge a service fee for the same. However, large institutional investors may receive direct access to place high-value trades. 

Once a trade is executed, it is settled on a T+1 basis, meaning the transaction is completed one business day after the trade. However, for a few selected securities, BSE offers T+0 settlement, allowing same-day completion of trades. 

Trading Sessions:

The BSE’s trading sessions are divided into 3 categories. Let us look at each one of them below:

1) Pre-open Session:

A brief time slot before the official market opens, allowing investors to place, modify, or cancel orders in advance. This pre-market session opens from 9 am to 9:15 am.

2) Normal Trading Session:

This is the primary period during which most trading transactions take place on the exchange platform, and this normal trading session is open from 9:15 am to 3:30 pm. 

3) Post-close Session:

A short duration after market hours during which the traders can place orders for execution on the following trading day, which is from 3:40 pm to 4 pm. 

Functions of the Bombay Stock Exchange

Bombay Stock Exchange carries out a range of essential functions, including securities trading, capital raising, market liquidity, and more. Here we have listed all the functions of BSE.

1) Securities Trading:

The Bombay Stock Exchange provides a platform for buying and selling various financial instruments, making trade accessible to all investors. It also enables many companies to raise capital by issuing shares to the public. 

2) Capital Raising:

BSE enables companies to raise funds for business growth by listing their shares through IPOs. Additionally, the existing companies can also secure additional capital through Follow-on Public Offerings (FPO). 

3) Market Liquidity: 

The BSE ensures that stocks remain liquid, allowing investors to enter or exit the market easily, reducing the risk of losses during price fluctuations. Also, a liquid market attracts more investors because easy trading builds confidence and helps keep stock prices stable and fair. 

4) Investor Protection: 

BSE, under SEBI’s regulation, ensures investor safety by enforcing transparency in company financials, which enables informed decisions. It also offers a dispute resolution mechanism for investor-broker issues and conducts awareness programs to promote safe investing. 

5) Ensures Transparency:

BSE promotes fair and efficient trading by using electronic systems that automatically match buyers and sellers, providing real-time stock prices and market trends. This transparency builds investor trust and helps prevent price manipulation and unfair practices. 

Objectives of the Bombay Stock Exchange

To maintain its role as a leading financial institution, BSE follows a set of well-defined objectives aimed at supporting a robust capital market system. Some of them are listed below:

1) Capital Formation:

The BSE provides a reliable platform where companies can raise funds by issuing shares to the public. This process of connecting investors with the companies will be a crucial part played by BSE to drive entrepreneurship and economic development. 

2) Fairness and Transparency:

One of BSE’s core objectives is to uphold the integrity of the securities market. It achieves this by implementing advanced electronic trading systems that ensure price discovery and efficient trade execution. Strict regulations and surveillance mechanisms will help in detecting and preventing fraudulent or manipulative practices. 

3) Investor Interests:

BSE is committed to protecting investors by ensuring that listed companies adhere to disclosure norms and regulatory requirements provided by SEBI. It also supports grievance redressal mechanisms and educational programs to ensure informed decisions among the investors. 

4) Financial Awareness:

To encourage greater participation in the securities market, BSE actively promotes financial literacy across different sections of society. Through various educational programs, the BSE educates people about investment principles, risk management, and market functioning. 

Market Segments of BSE

To facilitate a wide range of investment and trading activities, the Bombay Stock Exchange is divided into two major market segments. Let us understand each one of them below:

1) Cash Market Segment:

The cash market segment involves the actual transfer of financial instruments, where buyers receive the purchased assets directly into their demat accounts. 

This segment is further divided into two sub-categories based on the type of instruments being traded. They are:

• Equity cash market: Here, the investors buy and sell the company shares. 

• Debt or fixed-income market: This includes the trading of instruments like government bonds, corporate debentures, and other debt securities. 

2) Derivatives Market Segment:

The derivatives market deals with financial contracts whose values are derived from the underlying assets, such as stocks, currencies, or commodities. These instruments, like futures and options, may be physically settled only if held until the expiry date. However, most traders close their positions beforehand to avoid physical delivery. 

Here, each sub-segment allows the investors to hedge risks or speculate based on future price movements without necessarily owning the underlying asset. Such sub-segments are explained below:

• Equity derivatives: Here, the futures and options contracts based on individual stocks are traded. 

• Currency derivatives: Here, contracts tied to foreign currency pairs are traded. 

• Commodity derivatives: Here, contracts that are linked to physical goods, such as metals, agricultural products, or energy resources, are traded.

Major Indices of BSE

Bombay Stock Exchange has various key indices that help us understand the performance of the stock market in different segments of the economy. Below, we have listed the major indices of the BSE. 

1) BSE Sensex:

The Sensex is the premier index of the Bombay Stock Exchange, reflecting the movement of 30 top-performing and heavily traded stocks from diverse industries in India. It acts as a barometer for the country’s economic conditions and investor sentiment, offering a clear picture of how the large and established companies are performing in the market. 

2) BSE 500 Index:

Covering a wide array of 500 companies across various sectors, the BSE 500 Index provides a comprehensive view of the Indian equity market. It is designed to help investors understand the overall market performance and analyse trends across a broader segment of companies, offering a well-rounded market perspective. 

3) BSE Midcap Index: 

The BSE Midcap Index focuses on mid-sized companies, typically with market values between Rs 5 billion and Rs 20 billion. It offers insights about the businesses that are growing and expanding, often delivering higher returns but with more price fluctuations than blue-chip stocks. 

4) BSE Smallcap Index:

The BSE Smallcap Index targets small-scale companies with a market capitalization below Rs 5 billion. It gives exposure to lesser-known firms that can offer strong growth opportunities, though they also come with higher volatility and liquidity risks, making them suitable for investors with a higher risk appetite. 

5) BSE Bankex Index: 

Specially curated for the banking and finance sector, the BSE Bankex Index captures the performance of the leading financial institutions. It serves as a key tool for analysing sectoral trends and assessing the stability and momentum of the financial services industry. 

Top Companies Listed on BSE

There are several companies that are listed under the Bombay Stock Exchange in India. The following are among the top firms that are listed on this platform based on their market cap.

(The above data was recorded as of 20th May, 2025). 

Conclusion

Being Asia’s oldest stock exchange platform, the Bombay Stock Exchange stands as a cornerstone of India’s financial system. Known for its legacy, innovation, and contribution to the Indian economy, BSE stands as a symbol of trust, opportunity, and growth. 

With various initiatives that are aimed at improving financial literacy, enhancing market efficiency, and supporting innovation through platforms like the SME and Startup exchange, BSE continues to strengthen the foundation of India’s capital markets. As the Indian economy grows, BSE remains a vital platform for investment, economic development, and wealth creation!

FAQs

Q1. Where is the Bombay Stock Exchange located?

The Bombay Stock Exchange (BSE) is located on Dalal Street in Mumbai, Maharashtra, India.

Q2. What is the full form of BSE in the share market?

BSE stands for Bombay Stock Exchange. It is the oldest stock exchange in India and provides a transparent platform for trading in equities, derivatives, currencies, and other financial instruments.

Q3. When was BSE established?

BSE was established in 1875, making it Asia’s oldest stock exchange.

Q4. Who is the owner of BSE?

BSE is a publicly listed company owned by various institutional and retail investors.

Q5. Which is the oldest stock exchange in India?

The Bombay Stock Exchange (BSE) is the oldest stock exchange in India, established in 1875.