Sensex at 40: BSE bets on index investing, market depth to drive next phase of growth, says Sundararaman Ramamurthy

The completion of 40 years by the Sensex, India's benchmark equity index, marks a significant milestone in the nation's financial history. This event, coupled with the strategic vision laid out by BSE MD & CEO Sundararaman Ramamurthy, offers a crucial lens through which to understand the past, present, and future trajectory of India's capital markets. The Sensex, an abbreviation of 'Sensitive Index,' was first compiled in 1978 with a base value of 100 and published on January 2, 1986. It represents the performance of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE), acting as a barometer for the Indian economy.

**Background Context and What Happened:** The BSE, established in 1875, is Asia's oldest stock exchange. For decades, it remained the primary platform for capital raising and trading in India. The Sensex's journey over 40 years mirrors India's economic transformation, from a closed economy to a global economic powerhouse. Its rise from 100 points to over 70,000 points reflects periods of robust growth, economic reforms, and occasional market volatility. Sundararaman Ramamurthy's recent statements underscore a forward-looking strategy for the BSE, focusing on 'index investing,' enhancing 'market depth,' leveraging 'technology upgrades,' and driving 'regulatory reforms.' A key strategic move mentioned is BSE regaining control of its index business, which had previously been managed by Asia Index Private Limited (AIPL), a joint venture with S&P Dow Jones Indices. This move allows BSE greater autonomy and control over its product offerings and strategic direction, particularly in the burgeoning field of passive investing.

**Key Stakeholders Involved:** Several entities play critical roles in this ecosystem. The **Bombay Stock Exchange (BSE)** itself, as the institution facilitating trade and listing, is central. Its management, led by MD & CEO Sundararaman Ramamurthy, is steering its strategic direction. The **Securities and Exchange Board of India (SEBI)**, established in 1988 and granted statutory powers in 1992 under the SEBI Act, 1992, acts as the primary regulator, ensuring market integrity, investor protection, and orderly development of the capital markets. **Investors**, both retail and institutional (e.g., mutual funds, foreign portfolio investors), are the lifeblood of the market, providing capital and driving demand. **Listed companies** whose shares form the Sensex, and thousands of others listed on the exchange, are crucial as their performance directly impacts the index and investor sentiment. Finally, the **Government of India** influences the market through its economic policies, fiscal measures, and legislative framework, which impact corporate profitability and investor confidence.

**Why This Matters for India:** The Sensex and the broader capital markets are vital for India's economic growth. They facilitate capital formation, enabling companies to raise funds for expansion, innovation, and job creation. A robust and transparent market attracts both domestic and foreign investment, contributing to national development. The focus on 'index investing' is particularly significant as it democratizes investment, allowing retail investors to participate in market growth with lower risk and cost through products like Exchange Traded Funds (ETFs) and index funds. This promotes financial inclusion and broadens the investor base. Enhanced 'market depth' ensures liquidity, reducing volatility and making the market more attractive. 'Technology upgrades' are essential for efficiency, security, and global competitiveness, aligning India with advanced financial markets worldwide. 'Regulatory reforms' are crucial for maintaining investor trust and preventing systemic risks, which is paramount for sustained economic progress.

**Historical Context and Future Implications:** The Indian capital market has undergone significant evolution since the economic liberalization of 1991. The establishment of SEBI, the introduction of dematerialized trading (through depositories like NSDL and CDSL under the Depositories Act, 1996), screen-based trading, and the rise of the National Stock Exchange (NSE) have transformed the landscape. The Sensex's journey reflects this transition from an opaque, broker-dominated market to a more transparent, technology-driven, and regulated environment. Looking ahead, the emphasis on index investing suggests a shift towards passive investment strategies, which are gaining traction globally. This could lead to increased retail participation, deeper penetration of financial products, and greater stability in market movements. Technology, including Artificial Intelligence (AI) for algorithmic trading and data analytics, and potentially blockchain for settlement, will further redefine market operations. India aims to become a significant global financial hub, and a strong, well-regulated, and technologically advanced capital market is indispensable for achieving this ambition. The regulatory framework, guided by the **Securities Contracts (Regulation) Act, 1956**, and the **SEBI Act, 1992**, will continue to evolve to meet new challenges and opportunities, ensuring investor protection and market integrity.

**Related Constitutional Articles, Acts, or Policies:** The functioning of India's capital markets is deeply embedded in its legal and policy framework. The **Seventh Schedule of the Indian Constitution** places 'stock exchanges and futures markets' under **Entry 43 of the Union List**, granting the Parliament exclusive power to legislate on these matters. This is the constitutional basis for acts like the **Securities Contracts (Regulation) Act, 1956 (SCRA)**, which regulates transactions in securities, and the **SEBI Act, 1992**, which established SEBI as the statutory regulatory body. The **Companies Act, 2013**, governs the incorporation, responsibilities of companies, and their listing requirements, directly impacting the entities whose shares are traded. Various government policies, such as those promoting foreign direct investment (FDI) and foreign portfolio investment (FPI), financial sector reforms, and initiatives like the 'Make in India' program, indirectly support capital market growth by fostering economic activity and attracting investment. The ongoing focus on ease of doing business and financial inclusion also contributes to a more vibrant and accessible market.