NSE IPO: CBDO Sriram Krishnan on retail growth, product diversification, new opportunities

The National Stock Exchange (NSE) expects continued growth in India's capital markets, with increasing retail participation and product diversification likely to support its expansion over the long term, said Sriram Krishnan, Chief Business Development Officer (CBDO), NSE, in an interaction with Business Today Television (BTTV) on Thursday.

Krishnan said some of NSE's existing shareholders also participated in the IPO's anchor book, which, he said, gave the exchange "immense pride and satisfaction".

"The size of the market will grow because more and more retail participants are coming to the market with each passing month. We can see 20-30 lakh demat accounts being set up every single month. We can also see SIP flows coming through mutual funds on a steady-state basis, $3-4 billion or so," he said.

Krishnan said India's demographic profile and economic growth prospects could support the expansion of the capital markets over the next 10-20 years.

"So I think as India grows and does well, NSE will be at the centre of this growth and development," he said, adding that foreign investors have come to NSE based on this premise.

He also pointed to product diversification as an important growth area. "There'll also be a lot of product diversification, which automatically will make sure that revenue also gets diversified and the current obsession or focus on index options and particularly within that, the weekly index options, will probably get diluted as we go along," Krishnan said.

NSE sees traction in commodities

Krishnan said commodities was one of the emerging areas for NSE, noting that the exchange had been working on commodities for around two-and-a-half years.

"We are seeing good traction build up in the NSE crude oil contract wherein the latest expiry the premium was more than Rs 3,000 crore which is quite a big number and I think we have touched a critical mass in that product," he said.

He added that the natural gas contract was "following suit very closely".

On electronic gold receipts (EGR), Krishnan said NSE launched the product on May 4, with trading beginning on May 18. "There are a few hundred trades happening almost daily, but once EGR appears on retail broker apps you'll see a bigger participation curve building up," he said.

Krishnan said EGR could potentially represent the "dematerialisation of gold in this country" and open up new growth opportunities.

NSE has also applied to regulators for approval to launch corporate bond index derivatives. "As and when it's approved, we will launch that product. That could be a very exciting product as well for everybody because you know interest rates impact everybody," he said.

On CAS

Krishnan said NSE's closing auction session (CAS) was rolled out to help passive fund managers operate with zero tracking error and added that its rollout had been "good and efficient".

He also acknowledged concerns raised by market participants over the method used to determine settlement prices for index option expiries.

"However, the market participants have expressed concerns around the method in which the determination of settlement price for index option expiries is being taken," he said, referring to the consultation paper introduced by market regulator Sebi.

Krishnan said once feedback is received and a circular is issued, "the glide path will be clear to market participants and we can then move forward on that basis."

"All these regulatory changes are in the long run going to be very helpful for the growth and development of the market, and there's absolutely no doubt about that," he concluded.