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A journey from banyan tree to Dalal Street

Olga Tellis

It all started under banyan trees and then a peepal tree, which stands till today. Around 1840, half a dozen brokers met under a banyan tree at the Town Hall a few furlongs away from the present Dalal Street, where the imposing Jejeebhoy Towers, which houses the Bombay Stock Exchange, reaches for the skies. By 1855, their numbers increased to 30-40 and they met under banyan trees between the old Fort walls of the Mercantile Bank on an open site facing what is now the Central Bank at the junction of the Nagindas Master Road (Meadow Street) and the M.G. Road.

Incidentally, the New York Stock Exchanges (nyse) was said to have started under a buttonwood tree and in the UK in coffee houses. By 1860, the number of brokers increased to 60 and by the time the American Civil War began, there were nearly 200-250 of them.

It was written at that time that "they were the privileged class that created a noise and obstructed traffic as they met on the street and the entrances of banks. Bank managers had to meander through their ranks to get to the upper floors. Everyone bowed to them and the police saluted them.

In 1874, the brokers took premises near the present day Dalal Street, named after them, on a rent of Rs 130 per month and in 1895, they acquired a building for Rs 97,000 where there were two sturdy peepal trees.

The star among the brokers, the man who is single-handedly credited for the unprecedented explosion in business and trade, setting up banks and companies, was Premchand Roychand. He was a brilliant financial brain and made a fortune. He was the only one during his time who spoke English. He dressed like a prince, his wealth was overwhelming and he was called the Napoleon of finance. One of the now famous landmarks of Mumbai, the Rajabhai Tower in the Bombay University Fort campus, is named after his mother, says M.R. Mayya, the former president of the BSE who made English the language of trading, which till then was done in Gujarati.

The growth of the broking community and trading in loans, scrips, shares, bullion were the outcome of the thriving trade undertaken by the East India Company. Business got a tremendous boost in 1860-61, when the American Civil War broke out. With the supply lines of the cotton trade between England and America choked, India was the only place that had huge cotton stocks that could feed the pent up demand in Europe. Exports of cotton doubled from 5,66,000 bales to 11,88,000 bales. Cotton prices rose from 3d a pound to 27d and the cotton was paid for in gold and silver that poured into Bombay from Liverpool. The total import of bullion was Rs 85 crores between 1861-1865 and Bombay alone absorbed Rs 52 crores worth of this at an average of Rs 13 crores per annum.

Speculation was the name of the game as the sparse chronicles and articles by K.R.P. Shroff in the history of the exchange says, "Bombay became wild with the spirit of speculation. 1,256 companies were floated for cotton cleaning, pressing, hotels, shipping and steamer companies and brick tiles. The capital that was said to have been sunk in these new ventures was Rs 40 crores and the premium fetched was Rs 38 crores."

Roychand was the trend-setter in all this. His Asiatic Banking Corporation saw its capital of Rs 50 lakhs double, and it fuelled the ambitions of 94 others to get into business.

Like Mr Shroff writes, "Everybody was busy converting scraps of paper called allotments, shares, scrips into gold and silver."

The forerunner of the stock market in those days was described as a place for purchase and sale of security underlying the ownership of business property. By the 1830s, as business of the EIC prospered and several banks came up, business was done in shares of the banks like Commercial Bank, Chartered Mercantile Bank, Chartered Bank, Oriental Bank and Bank of Bombay and of the cotton presses.

Finally on July 9, 1869, "a few native brokers resolved upon forming in Bombay an association for protecting the character, status and interest of native share and stock brokers and of providing a hall or building for use of the members of the association." On February 5, 1887, they met at the Brokers’ Hall to execute a Deed of Association, resolving to constitute the first managing committee and appoint the first trustees.

On December 3, 1887, an indenture was executed constituting the articles of association of the exchange and the stock exchange was established "as a society to be called the Native Shares and Stock Brokers’ Association." The word "native" was important as only natives of India were admitted as members. The membership fee in 1875 was Re 1 which went up to Rs 5 in 1877, Rs 1,000 in 1896 and Rs 2,500 in 1916 and 48,000 in 1920.