As the Indian government takes steps to clamp down on retail F&O trading, IPO-bound NSE, which generates roughly two-third its revenue from this segment, believes that, over the long-term, investors will move away from speculative bets to specialised institutional products.
Speaking at a press event here on Saturday, Sriram Krishnan, Chief Business Development Officer (CBDO), NSE said that SEBI will slowly encourage people to go through the SIF route for the F&O market instead of trading directly and ‘burning their fingers’.
SIF or Systematic Investment Funds is an investment category introduced by the regulator which allows investors to participate in advanced market instruments like derivatives. These funds require a minimum investment of ₹10 lakh.
Krishnan said that just like how the mutual funds industry brought trust and protection to the cash equity segment, SIFs will do the same for F&O.
“SEBI has been prioritising long term investor education and awareness. So currently you may see a situation where a lot of people are directly trading F&O. But it is possible that in the future there may be a gradual shift and people may move towards institutional products to gain F&O exposure. Which may be a good thing,” he said.
Commenting on the long-term strategy for NSE, Krishnan said that the exchange will continue to introduce innovative products citing examples like Electronic Gold Receipts (EGR) and electricity futures.
“In the longer term, there will be so much diversification of revenue as a natural consequence. People will forget this current focus on index options,” he said.
NSE is gearing up for a ₹22,569 crore (upper band) public debut next week as a pure Offer for Sale (OFS). The Mumbai-based exchange has, in initial draft papers, proposed an issue size of around ₹30,000 crore but later trimmed it by 15 per cent.
Krishnan said that when the company initially gauged investor interest to offload their stake in the IPO, around 6% stake was available for participation.
“However, some of the shareholders feel that the NSE stock price is much more than what we are proposing to do the IPO at. So some of them have backed out of the OFS saying that they don’t want to tender their shares anymore,” he said.
Meanwhile, NSE expects the number of companies listed on its platform to nearly double to around 6,000 over the next decade.