BSE seeks to host govt debt auctions on exchange
2 min read . Updated: 05 Aug 2014, 03:42 PM IST
PremiumGovt plans to sell Rs6 trillion of bonds in the year ending March 2015, according to a budget estimate published 10 July
Mumbai:BSE Ltd, Asia’s oldest bourse, is seeking approval from India’s central bank to host government debt auctions to lure more individual investors.
BSE, backed by Deutsche Boerse AG, has asked the Reserve Bank of India to allow debt issuance through its electronic securities-sales platform, chief executive officer Ashishkumar Chauhan said. The RBI now holds weekly sovereign-note sales, which are open to individuals though dominated by institutional investors and banks, on its own platform.
We are writing to the central bank to seek approval for debt auctions through the exchange, Chauhan said in a 31 July interview at his office in Mumbai. Like in equity offerings, all classes of investors, including individuals, should be able to participate in the fixed-income issues.
India’s government plans to sell Rs6 trillion ($98.5 billion) of bonds in the year ending March 2015, according to a budget estimate published 10 July. BSE, the country’s largest bourse until 1995, is seeking access to the debt auctions as it lags behind National Stock Exchange of India Ltd. in market share for equities and stock derivatives.
The NSE handles twice the amount of shares as its 140-year- old competitor and controls more than 70% of India’s $28 billion equity derivatives market. BSE now handles about 17% of trading in cash equities and about 30% in currency futures.
Relative value
An exchange platform may encourage a larger cross-section of investors, including high net-worth individuals, to directly participate in the bond market, Suyash Choudhary, the Mumbai- based head of fixed income at IDFC Asset Management Co., said by e-mail.
Alpana Killawala, a spokeswoman for the central bank, didn’t respond to an e-mail seeking comment.
An alternative platform for sovereign debt sales may have limited impact because individuals already have access to the government’s debt auctions and they are more interested in securities with higher return prospects, according to Pradeep Madhav, managing director at STCI Primary Dealer Ltd.
Indian government notes have returned 7.9 percent this year, while the S&P BSE Sensex, the nation’s benchmark stock index, has rallied 22%. Local lenders offer as much as 9% on one-year fixed deposits.
The BSE also plans to introduce market makers to help facilitate smaller-volume trading in government and corporate bonds, said Chauhan. Market makers could be banks, non-banking financial companies or any large dealer operating in the field, he said.
Allowing debt auctions through the exchanges will open an investment opportunity, said Sanath Kumar Shetty, a 49-year- old accountant in Mumbai who has about Rs0.2 crore of investments, mostly in equities and debt mutual funds. It will offer investors an opportunity to directly trade bonds and ease of entry and exit. BLOOMBERG
