When looking for investment opportunities, it is wise to look beyond the local markets. The Indian stock market is one that many novice traders may not consider when making investments. India may not appear as elegant as other markets, but that is only a misconception that can cost you the opportunity to diversify your investments. The country has two main stock trading exchanges, which are the Bombay Stock Exchange and the National Stock Exchange. Recently, the Board of Directors of the NSE appointed Vikram Limaye as the new CEO and managing director. This change in leadership is one that is set to shake up the NSE and the stock market as a whole.
What to Expect
When the previous CEO exited suddenly, the NSE was left scrambling amid plans to take the exchange public. The bourse had already filed the prospectus for the IPO but had to postpone the process as it searched for a new CEO. NSE has been under pressure for a while to go public, especially from major shareholders like the State Bank of India. Various shareholders have also expressed interest in seeing the NSE listed. There have been talks to have the NSE listed on its own exchange instead of cross-listing, which refers to listing on a rival exchange. With Vikram Limaye at the helm, the exchange will proceed as planned. One advantage that investors get when a bourse is listed is the transparency of transactions. Publicly listed companies are also held to higher standards, which gives you peace of mind when trading on the stock market online with a broker like CMC Markets.
Vikram Limaye, if confirmed by shareholders and the Securities Exchange Board of India, will also have to deal with the regulatory challenges that the NSE is currently facing. Accusations have been brought forward that the NSE favoured particular brokers by giving them access to its algorithmic trading platform so that they had high-speed trading. Limaye said that he would cooperate with regulators and the government to ensure that the issues are resolved. Doing this will restore the high reputation of the NSE and give it more clout as India’s largest stock exchange. Traders will feel more at ease when buying and selling stocks on the bourse.
Although Limaye has not highlighted any concrete plans he may have for the NSE, he has hinted that his focus will be on market development. After the latest regulations from the RBI, which restrict the exposure that banks have to the corporate sector, Limaye figures that India’s growth will have to be funded from other fronts. For this reason, the NSE must develop markets in the region, which can then be the source of financing for the country’s future.
An Outside Take
Vikram will be the first NSE CEO who is not part of the NSE founding team. However, he does have the expertise and experience to head the bourse as he is the managing director and CEO of IDFC, an infrastructure financing firm. IDFC was among the first champions of the NSE and holds a stake as well. Limaye is an alumnus of Wharton Business School and holds an MBA in Finance and Multinational Management. For eight years, he worked at Credit Suisse First Boston in various departments, including structured finance, investment banking and capital markets. Before going to the U.S., Limaye worked with Arthur Andersen in Mumbai, Ernst & Young as well as Citibank. The Supreme Court also recently appointed Limaye as one of the members of the Board of Control for Cricket in India. These are a few of the accomplishments that sell Limaye as an ideal candidate. His experience in the finance sector cannot be questioned, not to mention that he has a reputation for being an institution builder, which is a trait that will help him grow the NSE.
NSE holds a dominant market share in spot trading, and as of 2009, it held about 98% of the derivative trading market allocation. As with the BSE, the NSE is an order-driven market, meaning investors place market orders that are then paired with the best limit orders. This type of trading mechanism has transparency to it, which is why traders love it. By fixing the problems at the NSE and guiding its IPO, Vikram Limaye will provide more opportunities for investors to cash in on India’s promising stock exchange.
