Tougher Sebi rules could make markets safer and bring in more investors: NSE chief

The National Stock Exchange (NSE) is not worried about the Securities and Exchange Board of India’s recent steps to curb retail activity in the derivatives market. NSE MD and CEO Ashish Chauhan said the regulator’s actions have made the market safer and should support further growth.

“Ten years back, there was no derivatives momentum. 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 after NSE’s listing on the BSE on Thursday.

He said India has only 13 crore unique individual investors, leaving significant headroom for growth. Even if the market grows tenfold, many Indians would still remain outside it, he said, adding that greater regulatory trust would help expand participation.

NSE is the world’s largest derivatives exchange. It has a 99.72% share in equity futures and a 68.48% share in equity options.

NSE Chairman Srinivas Injeti said regulatory interventions were necessary to protect retail investors. “Regulators have done a lot of studies, and they have found that small investors are losing money. Regulators have said the derivatives market is an important part of the capital market. But who will participate in it and how it should be run will require many interventions to protect public interest. There can’t be two opinions on this,” he said.

NSE made its stock market debut on Thursday, listing at Rs 1,800 a share, a 0.84% premium to the issue price. The stock was trading higher at Rs 1,834.60 in the afternoon. The Rs 22,569-crore issue was subscribed 5.71 times, supported by strong institutional demand. Foreign institutional investors also showed strong interest.
Chauhan said he is confident that FIIs, who have been heavy sellers in Indian equities, will return. He said a lot of money had moved to markets such as the US and Korea in pursuit of AI-related opportunities, but added that flows would return to India as cycles change.

“The US was a very fast-moving, very high-return market for the last 2-3 years. Now, probably, that won’t be the case in the next 2-3 years. That’s where we expect a lot more foreign inflows to come in,” Chauhan said.

Asked whether NSE’s subsidiaries could also list in the future, Chauhan said transparency would remain the guiding principle.

“Our fundamental principle is that all public institutions like NSE must be listed so that there is transparency in their activities,” he said.

He added, however, that the final decision would rest with the boards in charge of NSE in the future.

NSE shares will also trade on the Metropolitan Stock Exchange, apart from the BSE.

On whether NSE shares could eventually list on the exchange’s own platform, Injeti said NSE would follow the regulatory framework.

The current framework does not permit such a listing. But if regulations evolve, the exchange will provide its feedback, he said.

“Earlier, prior to 2012, even the listing of a stock exchange was not allowed. Through regulations, it was allowed in 2012 and became operational in 2015. As the market develops, if the regulator feels there is merit in aligning with the global practice of allowing an exchange to list on its own platform or to trade, we will certainly give our input,” Injeti said.