The Hindu Business Line : When the stocks rose in the east

Lyons Range, as the Calcutta Stock Exchange is popularly called, is in a classic time-warp. Those not familiar with its ways clearly want a complete break from the past and create a modern, technology-enabled milieu. And those indeed accustomed to it intend to build on the systems that once, not very long ago, shaped a grand, pulsating stock market on the country’s eastern fringes.

The disconnect between the two schools was never more palpable than now. And to understand matters fully, we must step into CSE’s history, reach its beginnings and trace its journey. We must also connect with the milestones it has crossed — starting with a meeting under an iconic neem tree. That was in the 1830s.

Remember, we are talking about an era when stocks and bonds, representing titles to property, were characterised by conditions of transfer from one holder to another. The earliest data on transactions in India related to loan securities of the East India Company. A newspaper of yore, Englishman, carried quotes of Bank of Bengal and Bengal Warehousing.

Business Line talked to a few old-timers to know more.

Sahib aura

“The history of trading here is incontrovertibly related to the history of the city,” says Debi Prasad Poddar, who has seen the market closely for nearly 50 years. The reference is to the emergence of some of the region’s great industries — jute, tea and coal. Traders did business in stocks of tea and jute companies, managed as they were by the sahibs. Manufacturing — engineering and steel — came a while later. So did stocks like Burn Standard.

Cut to more recent times, the 1930s and later. The Bhav data featured Indian Iron and Steel Co (popularly called “Iron”), Tata Ordinary (“Ordinary”) and Indian Copper (“Copper”). Companies like Ro htas Industries came later.

Which were the other stocks that made news then? Bird, Martin Burn and Imperial Tobacco — names that are now quite forgotten. A few, however, are still around. Hindustan Motor, for instance, is an enduring part of Lyons Range. Incidentally, a person called D. Bhalotia, a big speculator in “Motor” and a well-known bear, was believed to have killed himself when the stock rose to stratospheric levels.

Who came, who went…

In the 1940s and later, Indians started buying out the firangi owners of jute and tea companies. The Birlas showed their interest in jute. A few others entered the mining business. Some Birla shares started trading regularly on Lyon s Range.

Forward trading — that quintessential element of the market — was barred by Morarji Desai in 1969, remembers Poddar. “For a few years, there was a vacuum of sorts… till in the early 1970s, badla was devised,& #8221; he recalls. This, incidentally, was banned by SEBI in the early 1990s.

In those days, some of the largest participants were Indian institutions — UTI, LIC and GIC. Kolkata-based brokers never allowed a major crisis to erupt; leading brokers often, in a collective effort, bailed out those in trouble. Payments were regular, settlements were not clubbed. “It was as if an extended family was working,” the old-timer recalled. Personal stakes were not as high as they are today, he added as an afterthought.

“You know, 1000 Century Textiles shares are not a very big deal these days. This certainly was not the case then,” says Dhruba Nag, a relatively new-generation trader who has seen the local market for some time and heard about practices followed earlier. The bottomline is simple: In those days a trader with comparatively modest means could sense the feel of the market and make money.

The larger brokers of the day included Bagla & Co, Ram Narayan Kayan, Stewart & Co… Later, the likes of GS Kayan and SS Dalmia emerged. It may be mentioned here that Place, Siddons & Gough was a rare breed — it was actually a limited company.

Falling stock

At the best of times, the membership of the exchange crossed 900. Over 3,500 companies were listed. In 1997-98, CSE’s annual turnover was nearly Rs 1.8 lakh crores. All that soon became history — especially after the March 2001 scam.

With time (read: the arrival of National Stock Exchange and the decline of all regional bourses), Lyons Range has lost its glory. So, is there anything that still goes in CSE’s favour? Yes, Kolkata, the gateway to the entire North-East, has a trading fraternity worth naming. And traditions, too. For no small reason was the exchange the country’s No 2 bourse.

As things stand, the east is getting wealthier, a trend that is quickly getting reflected in the industries that house themselves here. These include IT and other key services. The wealth being created is providing good business opportunities for securities broking companies.

A number of national-level brokers have spread their wings in Kolkata and other centres in the east. Some local players have also tapped the market elsewhere.

CSE, which intends to become a demutualised entity, will have to work hard on a programme set by the regulator. Meanwhile, trading has reduced to a trickle. In fact, it has been that way for some years. The exchange is under a SEBI-appointed administrator. Many companies have de-listed lately, a trend that regional stock exchanges have generally faced.

In recent days, CSE has informed members that there has been a sub-division of the face value of shares, from Rs 250 to Re 1. This too is part of CSE’s reforms exercise. The “Demutualisation Scheme” mentions that CSE must ensure that at least 51 per cent of its equity is held by public other than shareholders with trading rights.

Lyons Range milestones

1908: Incorporation with 150 members.

1928: Construction of the building (7, Lyons Range)

1980: Government of India grants permanent recognition under Securities Contracts (Regulation) Act, 1956.

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