National Stock Exchange of India (NSE) is planning to list its shares on the stock exchanges and has filed a DRHP with SEBI. It is the leading stock exchange in India and has 85% share in Equity cash trading and 94% in Equity derivatives trading. The nearest competitor, BSE, is miles away in terms of technology and trading volumes.
FIIs constitute a 20.9% client base in the Cash market segment and 14.4% client base in the Equity Derivatives segment. As is well known, FII investment can be quite fickle and can change their temperament in a very short period of time. Since Oct 2016, FIIs have been net sellers in the Indian market and have sold off equities and bonds totaling Rs. 76,673 crores. This is almost 6 times the amount sold off in Oct 08 - Dec 08, the height of the financial crisis. There may be several reasons for the FIIs exit, whether it be the Trump factor and subsequent US market jump or India's demonetization drive.
A key difference between the two periods is that in the 2008 period, FIIs were net buyers in the debt
market. However, in the current period they have turned negative on both equity and debt segments.
Trading income drives almost 63% of NSE's revenues. With a bearish FII sentiment towards India, this may come under pressure.
Apart from the recent SEBI probe and corporate governance issues, another aspect to consider would be the returns delivered by major listed exchanges over the past year and their valuations. Of the major exchanges, only LSE delivered positive returns of 6.20% over the past year. The P/Es ranged from 20.6 for the Deutsche bourse to 42.73 for LSE. For a comparative analysis, LSE had revenues of £1.41 bn for the year ended 31.12.2015, whereas NSE had revenues of £281 million for the year ended 31.03.2016.
Although there is not much domestic competition for NSE, what would really matter is the foreign appetite for Indian securities.
FIIs constitute a 20.9% client base in the Cash market segment and 14.4% client base in the Equity Derivatives segment. As is well known, FII investment can be quite fickle and can change their temperament in a very short period of time. Since Oct 2016, FIIs have been net sellers in the Indian market and have sold off equities and bonds totaling Rs. 76,673 crores. This is almost 6 times the amount sold off in Oct 08 - Dec 08, the height of the financial crisis. There may be several reasons for the FIIs exit, whether it be the Trump factor and subsequent US market jump or India's demonetization drive.
A key difference between the two periods is that in the 2008 period, FIIs were net buyers in the debt
market. However, in the current period they have turned negative on both equity and debt segments.
Trading income drives almost 63% of NSE's revenues. With a bearish FII sentiment towards India, this may come under pressure.
Apart from the recent SEBI probe and corporate governance issues, another aspect to consider would be the returns delivered by major listed exchanges over the past year and their valuations. Of the major exchanges, only LSE delivered positive returns of 6.20% over the past year. The P/Es ranged from 20.6 for the Deutsche bourse to 42.73 for LSE. For a comparative analysis, LSE had revenues of £1.41 bn for the year ended 31.12.2015, whereas NSE had revenues of £281 million for the year ended 31.03.2016.
Although there is not much domestic competition for NSE, what would really matter is the foreign appetite for Indian securities.
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