NSE Shares Surge in Unlisted Market: Key Factors Driving Demand
Shares of the National Stock Exchange of India (NSE) have recently experienced a remarkable surge in the unlisted market, skyrocketing over 50% in just a week. From a trading price of Rs 1,500 last Thursday, the stock is now hovering around Rs 2,300 in the pre-IPO market. This dramatic increase has caught the attention of investors, prompting a rush to acquire shares ahead of the anticipated IPO. Several key factors are contributing to this heightened demand.
Regulatory Clearance and Ongoing Litigation
One of the primary drivers behind the surge in NSE’s stock price is the ongoing litigation with the Securities and Exchange Board of India (SEBI) concerning the co-location case. As NSE prepares for regulatory clearance, the resolution of this issue could pave the way for its primary offering. Reports indicate that NSE has earmarked Rs 1,000 crore to settle the case, which could significantly reduce uncertainties surrounding its IPO. SEBI Chairman Tuhin Kanta Pandey has expressed optimism, stating that the application for NSE’s IPO is manageable and can be resolved.
Eased Regulatory Controls
Recent changes in regulatory controls have also played a crucial role in boosting investor confidence. The introduction of a new International Securities Identification Number (ISIN) has streamlined the process of buying and selling NSE shares. Previously, the delivery of shares to buyers’ demat accounts could take up to two months or more; now, it has been reduced to just one to two days. This improvement has led to a significant increase in the number of NSE shareholders, surpassing 100,000—an unprecedented milestone for any unlisted company.
Strong Retail Demand and Financial Performance
The demand for NSE’s unlisted shares has surged, particularly among retail investors, following the release of its recent quarterly results and a 4:1 bonus share issuance. These developments have not only enhanced liquidity but also provided a robust dividend yield, further supporting the stock price in the unofficial market. For the financial year 2024-25, NSE reported a 16% year-on-year increase in revenue, reaching Rs 17,141 crore, and a staggering 47% rise in net profit, amounting to Rs 12,188 crore. The announcement of a dividend of Rs 35 per share has also attracted investor interest.
Rising Valuations and Global Interest
NSE’s valuations have seen a significant uptick, fueled by increased global interest. US-based Drew Investments has valued NSE shares between Rs 1,550 and Rs 1,700, pushing the overall valuation of the exchange to nearly Rs 5.7 lakh crore (approximately $50 billion). This surge in valuation has attracted high-net-worth individuals (HNIs) and retail investors alike. Comparisons with the Bombay Stock Exchange (BSE) have further bolstered investor sentiment, as many see NSE’s growth trajectory as a positive indicator.
Market Dominance
NSE’s dominant position in the market cannot be overstated. As the world’s largest derivative exchange and the second-largest stock exchange globally by trading volume, NSE commands a significant share of various market segments. As of Q4 FY22, NSE held a staggering 99.8% market share in equity futures, 94.6% in the cash market, 93.9% in currency derivatives, and 81.2% in equity options. This dominance reinforces investor confidence and solidifies NSE’s leadership in capital markets, further driving demand for its shares.
Optimism Surrounding the Upcoming IPO
Lastly, investor optimism regarding NSE’s upcoming IPO is a crucial factor in the current demand for unlisted shares. With SEBI and NSE engaged in discussions to resolve outstanding issues, there is a growing belief that the IPO will unlock substantial value. Pandey has indicated that while he cannot provide a specific timeline, the resolution of these issues is imminent, which has further fueled investor enthusiasm.
Conclusion
The recent surge in NSE’s stock price in the unlisted market is a testament to the exchange’s strong fundamentals, regulatory progress, and market dominance. With impressive financial results and a growing shareholder base, NSE is poised to become one of India’s largest IPOs. As investors continue to flock to this promising opportunity, the outlook for NSE remains bright.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.