The National Stock Exchange of India (NSE) saw 7.67 million shares traded in October at an average price of Rs 3,133.93, resulting in a total turnover of Rs 2245 crore. This marked the second instance in 2023 where trading volume exceeded 7 million, making it the second-highest monthly volume since the exchange began publishing share transfer data in January 2021.
In October, foreign portfolio investors sold up to 5.9 lakh shares, while domestic investors bought 38.65 lakh. Non-resident Indian investors sold around 3.27 lakh shares.
In terms of price, the highest recorded during the month was Rs 3,750, while the lowest was Rs 598 as against Rs 3,450 and Rs 2,800 a month back. Brokers say that unusually low prices indicate that the transactions may have been done with the intention of evading taxes.
The share price of the exchange in the unlisted market had rallied to Rs 3,500-3,600 between 2019 and 2021 amid rising profitability and hopes of an IPO. The average prices have cooled to below Rs 3,000 in the past year.
The strong appetite for the NSE shares is not surprising. For the past three years, the NSE has been the largest exchange in the world in terms of the number of F&O contracts traded and enjoys a monopoly in the space in India. The exchange has been gaining market share steadily in the cash market as well — from 83 percent in FY13 to 93 percent in FY23.
Its operating profit margin is close to 70 percent, and it is the number one derivatives platform globally, according to data by the Futures Industry Association. The number of wealthy investors owning NSE shares has risen exponentially over the last five years. At the end of FY21, barely 650 individuals owned the NSE shares. That figure now stands at over 4,300, with DMart founder Radhakishan Damani, industry captains, and many reputed stock market investors among the shareholders.
NSE posted a 13 percent on-year rise in consolidated net profit, reaching Rs 1,999 crore for the three months ended in September, while its consolidated income from operations surged 24 percent to Rs 3,652 crore. The net profit margins for the July-September quarter of FY24 stood at 50 percent. In the first half of FY24, NSE contributed Rs 18,744 crore to the exchequer, inclusive of STT (Securities Transaction Tax) of Rs 14,858 crore, stamp duty of Rs 1,156 crore, GST of Rs 975 crore, income tax of Rs 1,252 crore, and Sebi contributions of Rs 503 crore.
On the trading volumes front, cash markets recorded an average daily traded volumes (ADTVs) of Rs 83,540 crore in September, up 9.1 percent on-year. Equity futures clocked an ADTV of Rs 1,29,497 crore, up 10.3 percent, and equity option (premium value) ADTV stood at Rs 60,527 crore, up 5 percent YoY.
Rival BSE, with a much smaller market share, slower growth in revenues, and less than half the operating profit margin, is quoting roughly 53 times trailing earnings. Using the same yardstick, the NSE shares should command a value north of Rs 5,000 apiece, and perhaps well over Rs 7,000, if a premium for dominant market share were to be applied.
In January, the Securities Appellate Tribunal (SAT) set aside the order by the Securities and Exchange Board of India (Sebi) against the NSE in the colocation case, imposing a Rs 625-crore disgorgement penalty on the bourse. In March, the Supreme Court refused to stay the SAT order and asked Sebi to refund Rs 300 crore to the NSE, subject to the exchange giving an undertaking that it would return the money along with interest if Sebi succeeded in its appeal in the Supreme Court.
In 2015, complaints were filed about NSE providing unfair trading advantages to certain co-location clients. The Supreme Court refused to grant a stay on Sebi's investigation.
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