'There will always be an appetite for Nifty in foreign destinations'

In an interview with Manoj Dharra, Chitra Ramkrishna, MD and CEO, National Stock Exchange (NSE) talks about the 15 year journey of the exchange and the road ahead. 

Q1) Nifty has competed 15 years, we are now talking about the International Financial Center. How is the transformation?

Ans- Firstly, I think the 15 years of Nifty have been a satisfied journey. When we started, Nifty was a better meter of the market. Within 15 years, people have adopted it, and today it has the most popular and excepted contracts, not just in India but worldwide. This is a good proxy for Indian investment; this is something that Indian markets should be proud of. It has been a really interesting journey.

Q2) During initial days, what was the recipe for NSE's fabulous take off?

A) I think it was an idea whose time had come. In other words, if our markets had to really rise up to the global paradigm, there was no choice but to transform. Therefore, a modern, electronic, and transparent market was the need of the day. I think it was all about the right timing and there was a huge appetite in the country at that point to adopt a new market model. A lot of first time professionals wanted to become intermediaries, and lot of investors wanted to come into the market. So, in a way, it answered the need of different stake holders and the different governance model from day one. From day one we were a demutualized exchange, which helped built trust and credibility of the institution.

Q3) From a single segment exchange to a multi-asset exchange that started currency trading, and now possibly commodities. Do you think the role of exchanges is becoming more significant?

A) Actually, when we started, exchanges only did stocks. Not just in India, stock exchanges were very different from other exchanges even in the rest of the world. So initially, we started a stock exchange, but we were quickly able to have a framework which helped us move into derivatives and preparing the market for derivatives. A journey of building confidence and education around derivatives helped us build a good equity-derivatives market in the country. 

Then came currency, and now bond futures. As you rightly said, we'd started as a debt exchange, and today I think, in the last three-four years, there has been a lot of work going back into debt. For example, the corporate bond reporting platform has gained a lot of traction in the last three years, and bond futures which, I think, will go a long way in building liquidity and good price discovery around bonds. So what you said is absolutely true. We have moved away from being a single product exchange into a multi-asset class exchange. This is true even globally but I think, in India, the regulatory frame work and policy has envisioned this and made it possible for the exchanges to offer a multi asset platform.

Q4) The exposure of savings to equity market is at a two-decade low. What is your plan for that.

A) This is our objective. One, how do you bring retail savings into capital formation and, second, there has been a lot of prosperity in the market within the last 15 years; how can the common saver also benefit from this prosperity. Today, we are one of the largest markets worldwide. Having said that, the big journey for us in the next five years is to make the common saver benefit from the prosperity of the market. 

For this, we have to select the appropriate products because we need more instruments that are appropriate for the small saver. Today we have a brilliant product like Exchange Traded Funds, because it is a passive investment. One does not need to think much, (there's a) regular investment plan SIP (Systematic Investment Plan), and you put money over the long term which builds your prosperity in line with the market's prosperity. We need more products like this, and more reach so that it is (as) easy to put money into SIP of an ETF as it is to go and put money in a bank account.

Q5) SGX opening is a big disadvantage for domestic investors. By the time our markets open, the game is almost done by global investors. What are your plans; are you working toward fair play?

Ans5) Even today, onshore market is the one that drives away with price discovery. I think that is very strong in this country. Having said that, more and more markets worldwide always ask their participants about the time frames they want to work in, and as an infrastructure, we will provide whatever the market wants. But in today’s day, we shouldn’t feel stressed for Nifty opening because the onshore discovery is very, very strong.

Q6) If you talk about volume, by the time Indian markets open, are the volumes on SGX NIFTY too high?

Ans) There are strong domestic, onshore and other large players who play (in) the onshore markets. There will always be an appetite for Nifty in foreign destinations as is evidenced by the fact we are in 32 destinations already. We will continue to find a way to make investments in the Indian market more and more attractive.

Q7) Is algorithm trading impacting retail investors, and how would you safeguard interest of small investors?

Ans 7) Every market has a different set of players -- retail, institutional, domestic, foreign, proprietary traders, algo (algorithmic) traders -- and infrastructure should cater to everyone's requirements, needs and balancing. It is our job. For example, if you take the top ten retail broking houses, they might be technologically savvy and use this reach. They have huge investors, facilitations, services, etc, which makes it possible even for a small or retail investor coming through them to leverage the technology that’s available. (At the) end of the day, algo traders have a different role to play. 

The concern that you raised is something that every regulator across the world is worried about. Indian regulators Sebi, given a frame work of algo trading much ahead of many markets in the world, and in fact, many other markets have actually copied this framework. So we're ahead of the curve. 

Q8) In the retail segment, do you think that the role of a multi-asset exchange that has currency and now, possibly, even commodities, is becoming more significant? 

Ans) There is tremendous scope in this area. We have to look at next-generation products that will be useful to the derivatives, which has done very well in the last ten years. If you see the growth of other countries, it is derivatives products. So, this is really the future where we must invest to bring in more safe, simple and universal products. Real estate today REIT is in demand. Every product should be of a larger use to the ultimate costumer. For example, Railways is trying to raise a lot of funds around the assets that they have; even a product like a Railway REIT can be created. (At the) end of the day, there has to be a match between demand and supply. Simplicity is at the heart of everything complexity should be at the back-end.

Q9) Some new announcements have appeared from Sebi, like a platform for start-ups. What's your take on them?

Ans) It's a good initiative and a new niche segment that required a separate focus to help start-ups raise capital within the country. We always look to the West or other destinations. So I think, this is a great initiative, and they have done so with significant engagement with the industry. We are quite enthusiastic about engaging with the companies, and are looking for a way to get them aboard. 

Q10) What is the goal in front of NSE now, that you want to achieve in next five years? 

Ans) I think it is a revolving process, as I said, the basic objectives always remain the same. 

Q11) What are the basic objectives?

Good, well-governed markets, investor awareness, to improve the financial literacy of the investing population so that the next generation is far more literate. Far more companies should be able to raise capital from the market. I don’t mean this is a number game, but at end of the day, why should we not make raising money from the market easier and simpler. 

Here the exchange has a role to play. As an infrastructure, how can I prepare the companies way before they need to raise money, so that when there is a need, they will come and access the market. At the same time, we must prepare the supplier of capital too. He should have the simplicity and ability to understand what to invest, and the risk he is taking. So our job sometimes is not that glamorous, but it is about putting all the building blocks in place. So that before you realise it, your market is five times where it is today.