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Why NSE was formed?

The Bombay Stock Exchange (BSE) set up in 1875 as The Native Share and Stock Brokers Association was the undisputed stock trading center of the country. But just like everything has its age and time, BSE too had become an old horse in the race of fast paced financial markets of the world.

Despite being Asia’s oldest exchange, it had failed to grow the equity culture in the country.
It had become a closed club of powerful brokers who between them controlled trading in the country.
Despite overpowering all 18 regional exchanges, it lacked modernity and technology.

Therefore India was in dire need of a more sophisticated exchange. Therefore the government in early 1990 set up the Pherwani committee chaired under the ex UTI cheif. The comittee recommended setting up of a National Stock Exchange, which in itself was revolutionary as no other trading zone except New York(NYSE and NASDAQ) had more than one Exchange.

This of course was met by huge protests by hegemonic broking communities of BSE. The entrenched broking community headed by powerful leaders opposed the new creation and threatened that a two-exchange system would only lead to greater volatility.

But the government wanted to weaken the outcry of this lobby and started to look for promoters of the NSE. Soon it had roped in LIC, SBI, IDFC and global investors from Europe, Mauritius, and even Goldman Sachs. With such reputed supporters backing NSE, SEBI recognized it in 1993, while trading began in 1994, and prestigious NIFTY50 came into existence in 1995.

Such is the history of the formation of National Stock Exchange