The National Stock Exchange (NSE) sees recent stringent measures by the Securities and Exchange Board of India (SEBI) as a catalyst for market growth, rather than a deterrent. According to Ashish Chauhan, NSE's Managing Director and CEO, these tougher regulations are crucial for building investor trust and expanding India's participation in capital markets.
Enhanced Safety Drives Investor Confidence
Speaking after NSE's listing on the BSE, Chauhan highlighted that each time SEBI introduces stricter decisions, the market paradoxically grows due to increased safety. "Each time more investors come in, they find the market more trustworthy and safer. And each time SEBI takes a tougher decision, many people think the markets will close down. It actually increases because the markets become safer. And that’s what will continue, in my opinion," Chauhan told reporters.
India currently has approximately 13 crore unique individual investors, indicating substantial room for expansion. Chauhan believes that enhanced regulatory trust will be key to bringing more Indians into the financial fold, even suggesting the market could grow tenfold and still have significant untapped potential.
Protecting Retail Investors in Derivatives
NSE Chairman Injeti Srinivas echoed these sentiments, underscoring the necessity of regulatory interventions to safeguard retail investors, particularly in the derivatives market. "Regulators have done a lot of studies, and they have found that small investors are losing money," Srinivas noted, affirming that while the derivatives market is vital, its operation requires interventions to protect public interest.
The NSE holds a dominant position in the global derivatives market, boasting a 99.72% share in equity futures and 68.48% in equity options.
NSE's Listing and Future Outlook
The National Stock Exchange recently made its market debut, listing at Rs 1,800 a share, a marginal premium over its issue price. The Rs 22,569-crore issue was well-received, primarily driven by robust institutional demand, including significant interest from foreign institutional investors (FIIs).
Chauhan expressed confidence that FIIs, who have been net sellers in Indian equities recently, would return. He attributed previous outflows to a pursuit of AI-related opportunities in markets like the US and Korea, anticipating a shift in investment cycles that would favor India in the coming years.
Regarding potential future listings of NSE's subsidiaries, Chauhan emphasized transparency as a core principle. "Our fundamental principle is that all public institutions like NSE must be listed so that there is transparency in their activities," he stated, though he added that final decisions would rest with future boards. NSE shares are also set to trade on the Metropolitan Stock Exchange, in addition to the BSE.