Business Case Studies, Finance, Accounting and Control Case Study, Tug of War-NSE vs BSE

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Finance, Accounting and Control Case Study

Case Title:

Tug of War-NSE vs BSE

Publication Year : 2006

Authors: Anandan Pillai & Joel Sarosh Thadamalla

Industry: Banking, Insurance and Financial Services

Region:India

Case Code: FAC0036A

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
Bombay Stock Exchange (BSE) established in 1875 by an association of brokers was the prominent stock exchange in India and the oldest in Asia. The BSE index SENSEX (consisting of 30 representative stocks) emerged as a prominent brand in the country. Over the period of time BSE brought about various technological upgradations and made training online, from an initial outcry system of trading. However, severe scam in 1991-92 raised the questions of transparency in trading.

In order to provide more transparency and fair trading platform for investors, NSE was established in 1995, by a group of leading financial institutions in India. Being a professionally managed, for-profit exchange NSE, brought various product differentiations and facilitated investors. Within a short span of 10 years, it became the leading stock exchange in the India and third largest in the world.

In 2005, BSE in order to sustain competition from NSE, transformed into a corporate entity (ownership and management were separated).

The case discusses the growth of BSE and how a comparatively more professionally managed NSE gave a tough competition to it. Whether the restructuring exercise carried out by BSE would benefit it in regaining its glory was to be seen.

Pedagogical Objectives:

  • To study the growth of BSE from a simple association of brokers to a professionally managed stock exchange
  • To study the success of NSE and the ways in which it provided tough competition to BSE
  • To analyse the prospects of restructuring exercise carried by BSE.

Keywords : NSE, BSE, SENSEX, NIFTY, NSDL, CDSL, Stock exchanges, Cash segment, Derivative segment, Future & Options, SEBI, Demutualization, Finance Case Study, Restructuring, Management dilemma, Badla system

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