New Delhi: Riding on superior technology and FII preference, the National Stock Exchange is expected to surpass its older counterpart, the Bombay Stock Exchange, in market capitalisation this year for the first time in history.
According to a report by global consultancy Celent, 2009 would be the first year when NSE’s market capitalisation is expected to exceed that of BSE.
“NSE is expected to overtake BSE in market capitalisation in 2009. Already far ahead in turnover, NSE is expected to further its lead over its older counterpart,” the report titled, ‘Indian Exchange-Traded Securities: Poised for Further Growth´ stated.
NSE’s market capitalisation stood at Rs47,01,923 crore at the end of trade on Friday last week, not far behind the Bombay Stock Exchange’s valuation of Rs50,12,966.76 crore, according to data available on the two bourses.
In terms of the relative size of the two main Indian equity markets, NSE has become the exchange of choice, it added.
According to Celent estimates, the market turnover of NSE for 2009 would be more than two times the turnover of BSE. On 7 August, NSE turnover in value terms was around Rs 17,650 crore as against BSE’s about Rs5,443 crore.
“This is creditable considering that NSE has been functioning only since 1994 compared to more than 130 years of BSE’s existence,“ the report added.
Interestingly, NSE, ranked third worldwide in terms of the number of equity trades in 2008, is preferred by foreign institutional investors (FIIs) trading in the country, while BSE is more popular with retail investors, domestic brokers, and sub brokers.
The preference by FIIs to trade on the bourse makes the turnover at NSE much higher than its counterpart because foreign investors hold on to shares for a shorter period of than their local counterparts.
NSE has given better performance in the fledgeling debt market as well, where it has got eight per cent compared to BSE’s less than 1%.
Further, Celent report stated NSE has already cornered the exchange-based debt markets and the equity derivatives business. The country’s equity derivatives market is also dominated by NSE, which has the leading position among derivatives exchanges in the world as well.
“Superior use of technology from its inception and better strategy has meant that NSE towers over its local counterpart in BSE. Also, it is expected to break into the global top five by volume in the near future,” the report added.
In 2008, NSE had a trade volume of 590 million contracts which grew by 55.4% over previous year, making it the eighth largest derivatives exchange in the world.