Weeks before the SEBI order, investors cut exposure to NSE

Before the SEBI issued an order against former NSE MD and CEO Chitra Ramkrishna, foreign investors cut exposure to NSE in January. The former NSE MD and CEO charged with sharing sensitive, confidential information with an ‘unknown yogi from the Himalayas’ caused a flurry of activity in NSE. 

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Foreign Investors cut exposure to NSE
Image Source: Internet, Pixabay

Before the SEBI issued an order against former NSE MD and CEO Chitra Ramkrishna, foreign investors cut exposure to NSE in January. 

The former NSE MD and CEO charged with sharing sensitive, confidential information with an ‘unknown yogi from the Himalayas’ caused a flurry of activity in NSE. 

Foreign investors cut exposure to NSE

Almost 50% of similar transactions above Rs 2,000 per share occurred in December. Some of the transactions took place at Rs 2,800 per share. 

The December transactions led to signs of distress selling in foreign investors in January. 

Furthermore, various foreign investors and non-Indian residents began cutting their exposure to the bourse in December. 

However, frantic trading is not new to NSE. A similar incident occurred in September when many transactions occurred between domestic investors. 

Nevertheless, in most months in 2021, less than 100 transactions took place. 

NSE is yet to go public

While the demand is strong from domestic wealth management funds and high net worth individuals, NSE is yet to go public. 

Furthermore, while SAIF Capital trimmed its stake, leading foreign investors such as Citigroup, Norwest Venture Partners, and Goldman Sachs left the NSE in FY22. 

Market participant tracking the space said, “Investors don’t seem to be too bothered about the controversy, they are confident that once the crisis blows once investigation is concluded, it is a matter of time before the shares list.”

However, the sales timings weeks before the SEBI order has raised eyebrows. 

Moreover, market veterans think the colocation controversy that dogged NSE since 2015 connects to the sales. 

Institutional investors vs individual investors

The institutional investor’s stake fell to less than 50% compared to the 87% stake in NSE in FY12 end. 

Furthermore, institutional investors’ stake has dipped drastically over the last decade. 

However, a prominent HNIs stake owner in NSE is Radhakishan Damani, owner of the DMart chain. 

While domestic investors await SEBIs approval for going public, NSE’s share prices doubled from around Rs 1,000 in June 2020. 

Moreover, according to brokers dealing in the market, the NSE stock is currently quoting nearly Rs 2800-3000. 

NSE profits

Chennai-based Spark Capital commenced coverage on NSE with a buy rating and a target price of Rs 3950 earlier this year. 

Furthermore, NSE reported revenues of Rs 5,551 crore. The payments included an operating profit margin of 76%. The net profit margin of 54% followed as the nine months ended December 31, 2021. 

NSE transactions

Foreign shareholders sold more than one-third of 209 NSE shares to domestic investors. 

Furthermore, foreign investors sold 11.61 lakh shares for prices between Rs 1,650 and Rs 2,800 per share. 

Incidentally, most of the shares sold struck below Rs 2,000. Furthermore, it isn’t determined if one or many foreign investors sold the shares. 

Nevertheless, while the NSE shares do not actively trade since they are unlisted, the 11.61 lakh shares are worth 0.2% of NSE’s equity base. 

Lastly,

As the SEBI issues an order on Chitra Ramakrishna, foreign investors cut exposure to NSE due to the delay in the exchange’s plan to go public. 

However, observers argue the flurry of selling in January could be related to the delay in NSE’s listing plan. 

Also Read – Ex NSE Chief interrogated for 12 hours by CBI

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