The NSE stock, one of the most-traded counter in the unlisted space, has hit a record high of Rs 6,500 and its market capitalisation topped Rs 3.2 lakh crore in July, continuing the record run post the Covid pandemic.
Compared to other listed exchanges, NSE’s market cap would be the sixth-largest in the world and the largest in Asia.
If one takes the weighted average price of NSE, it has jumped 54% in the last one year to Rs 4,453.93 in July, outperforming the benchmarks – Nifty 50 and Sensex – by a wide margin as they have risen around 23% each in the same period.
The surge in NSE’s stock price has been fuelled by a rise in the number of people flocking to equities as the continued bull run in the last four years has popularised it as saving- and money-making financial assets.
The pace of growth is reflected in the skyrocketing number of unique investors: Since March 2021, NSE has added an average of 10 million unique investors on its platform every 6-7 months. The exchange now has over 100 million unique investors as of August 8.
“The investor base has seen more than 3x jump in the last five years, facilitated by rapid growth in digitisation, rising investor awareness, financial inclusion and sustained market performance,” the NSE had said in a press release.
The growth for the country’s largest exchange and its share price has come despite an increase in competitive intensity from its rival BSE over the last one year.
An analyst from a leading brokerage firm said the BSE is not taking away NSE’s existing market share, it is garnering a higher share in incremental growth that the sector is witnessing.
However, the rising competitive intensity is not the primary concern for the NSE as of now. It is grappling with a bigger concern – regulatory changes, particularly in the futures and options segment.
Market regulator Securities and Exchange Board of India (Sebi) released a consultation paper recently aimed at significantly curbing the activity in weekly options contracts and increasing the overall margins and contract size for participating in the derivatives market.
The NSE, which has an around 90% market share in equity options (on the basis of premium), is set to be the biggest loser if the final norms are along the similar lines as the consultation paper, according to experts.
The move could limit the gains for the stock at least in the near term as any decline in the turnover in derivatives market will hit the revenue.
“We believe there is a long runway for growth (for the sector), led by a substantial rise in volumes due to increased investments and trading in financial instruments, and the need for higher capital as the economy expands but regulatory changes may impact profitability and growth outlook,” Sharekhan said in a note.