NSE sees 6.33 million shares change hands in Sept, institutions pick up the most

NSE

Nearly 6.33 million shares of the National Stock Exchange of India (NSE) changed hands in September at an average price of Rs 3,055 each, taking the total turnover to Rs 1,860 crore.

In September, foreign portfolio investors picked up 4.36 lakh shares, while domestic investors bought 29.8 lakh. Non-resident Indian investors sold around 34.17 lakh shares.

In terms of price, the highest recorded during the month was Rs 3,600, while the lowest was Rs 2,200 as against Rs 3,935 and Rs 1,800 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.

Brokers dealing in the NSE stock say that there is a lag of four-five months, sometimes even more, from the time a deal is struck, and when the shares are transferred after the board approval.

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’s net profit for June quarter was at Rs 1,844 crore on a consolidated basis, up by 9 percent on a year-on-year (YoY) basis. The exchange's consolidated income from operations came in at Rs 2,987 crore for Q1 FY 24, up by 13 percent YoY. On a consolidated basis, earnings per share increased to Rs 37.26 in Q1 FY 24 from Rs 34.13 in Q1 FY 23.

On the trading volumes front, cash markets recorded an average daily traded volumes (ADTVs) of Rs 83,540 crores in September, up 9.1 percent YoY. Equity futures clocked an ADTV of Rs 1,29,497 crores, up 10.3 percent YoY and equity options (premium value) ADTVs 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 latter 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.