Until the Second World War, raising of capital in India from the Securities Markets was free from all controls. After the Second World War, the Defence of India Rules was introduced which imposed restrictions for the first time on the issue of capital. They continued even after Independence and were formerly incorporated in the Capital Issues (Control) Act, 1947. The office of the Controller of Capital Issues (CCI) administered the Act. After independence in the year 1947, the Indian Government followed the policy of giving predominance to public sector enterprises in the economy. As part of this policy, various industries were nationalised and certain sectors of economy were reserved for the public sector. Private Sector Corporations were restricted and access to equity was only through the C.C.I.

Under the Capital Issues (Control) Act, 1947, companies were required to obtain approval from CCI for raising capital. New companies were allowed to issue shares only at par. Only existing companies with substantial reserves could issue shares at a premium which had to be calculated in accordance with CCI norms, which were based on an estimate of "fair value" and not on the "prevailing market price". There were tight controls on the issue of rights and bonus shares. With the repeal of the Capital Issues (Control) Act, 1947 on 30th May 1992, Companies are now able to raise capital without requiring any consent from any authority either for making the issue or for pricing it. Restrictions on rights and bonus issues have been removed. New as well as established companies are now able to price issues according to their estimate of market conditions. From hawking shares under a Banyan tree to shouting matches in the trading ring, the Indian Capital Market has now entered the hush of screen based trading.

The Bombay Stock Exchange (BSE) established in 1875 has its roots in brokers coming together in 1860s to trade in shares issued by various companies. The BSE today is 120 years old and is perhaps the second oldest stock exchange in the world. Out of the total quoted companies in India, 46% are listed on the Bombay Stock Exchange and its share market capitalisation is 74%.

The growth in the Indian Capital Market was kicked off for the first time by the heavy handed policy laid down under the Foreign Exchange Regulations Act, 1973 (FERA). FERA forced multinationals to reduce their share holdings to 40%. Multinationals unloaded en-masse and that too very cheaply. The shares of Hindustan Lever bought during that period at Rs.16/- are today quoted at Rs.605/-. Ponds shares then sold at Rs.23/- have today grown to Rs. 900/-. In those early days of the '70s, most brokers only dealt in forward group and very few dealt in cash scripts.

Mr. Dhirubhai Ambani of Reliance Textiles and Industries provided people who missed FERA an opportunity to become millionaires in their lifetime. The public issue of Rs.2.82 crores of Reliance Textiles & Industries in November 1977 was over subscribed 8 times despite the fact that Hindustan Lever and Hindustan Dorr-Oliver had issues around the same time. Since then the Reliance Group has tapped the capital markets 33 times raising Rs.10, 000 crores. From an initial base of 6200 shareholders, the Reliance Family now has 4.3 million members, which means that one out of every four investors in India owns Reliance shares.

Then came Harshad Mehta, riding the back of the economic liberalization and the optimism, which it generated. Mehta, illegally funded by Banks, sent the stock prices sky-high. The BSE Index, which was 805 in April 1990, went to 1245 by March 1991 and by the end of 1992, just before the SCAM was detected, went beyond 3500. During this phase when UTI launched its Master Gain '92 Scheme, 6.2 million applicants poured in Rs.4712 crores.