NSDL, CDSL, BSE & IPO-bound NSE: What Sunil Shah of SRE PMS says on these capital market players

Sunil Shah, Fund Manager and Partner at SRE PMS, on Tuesday shared his views on select capital market players, saying that the current market scenario will not see a broad-based rally across all stocks and a bottom-up approach is required.

Commenting on BSE Ltd, Shah pointed to relative valuations. He said that with IPO-bound NSE Ltd now accessible in the unlisted domain for retail participants, the premium on BSE shares looks stretched. "On a relative valuation basis, BSE, even at this price, would be expensive compared to NSE and also we have seen a recent clampdown from the regulator (Sebi) for the volumes in the F&O space, which happened. This calls for a price correction and as I stated BSE would be comparatively selfishly valued than NSE," Shah told Business Today.

He added that earlier, when NSE was not available, investors had limited options and BSE attracted flows. But with NSE becoming accessible, investors may shift preferences. "So, I think BSE maybe could be a pass and maybe one can look at a twin holding of CDSL (Central Depository Services Ltd) and NSDL (National Securities Depository Ltd), that can be a proxy to the entire financialisation theme and those are still undervalued compared to the exchanges," he said.

On the depositories, Shah suggested a diversified exposure. "Rather than picking one at any point of time, it's better to play 100 per cent of the available opportunity by investing in both the companies. Now NSDL, the IPO, which had come at about Rs 850 or so and is quoting at about Rs 1,200 or so. I think the price is reasonable enough and one should maybe park in both the companies to really capitalise rather than picking one of the two and then see the other one go up," he said.

He further highlighted the different business drivers of NSDL and CDSL. "NSDL looks at institutional on the contract part of it. In addition, there are a lot of large-cap unlisted companies which are in the fold of NSDL. So whenever those large cap companies get listed, which are from the government's side, NSDL will have a role to play. CDSL, a proxy of the retail participation in this entire online brokers, has got strong foothold in the market. Hence, I'm saying that at one point of time, you might see good companies getting listed and NSDL getting fancy in the market. On the other side, you will see retail participation pick up if the market is really becoming strong," he explained.

According to Shah, while both NSDL and CDSL operate as depositories, their client bases differ and each could see momentum at different times. "The business model, given that both of them are depositories, is one, but underlying their classification of the clients is significantly different. So you will see a run up in one at one point of time. I'm trying to say that it's better to play both of them rather than pick one of the two," he added.

Shah also disclosed that these companies form part of his portfolio, and that both his clients and family members are invested in them. He cautioned investors to exercise discretion and make independent decisions. "Please consult your advisor before taking any investment call," he said.