Too Big To Fail

It’s been a quarter of a century since the National Stock Exchange made its debut. The late RH Patil, an institution builder, was not just instrumental in setting up the country’s first electronic demutualised stock exchange, but also went on to create the National Securities Depository, the National Securities Clearing Corporation and the Clearing Corporation of India. NSE has since become synonymous with stock trading, given that today it commands over 90% of both the cash and derivatives market, leaving Asia’s oldest bourse, the Bombay Stock Exchange, as a marginal player. 

But the venerated institution that was seen as a panacea to the ills of a broker-driven exchange, and which established itself as the epitome of transparency and governance, has lost some of its sheen in recent times. Regulatory laxity, vested interests and blatant misuse of authority have all come back to haunt the exchange. Ironically, NSE has fallen prey to the same ills that plagued the BSE, and the very reason for which it was created. What went wrong at India’s systemically critical market institution, is the subject of this edition’s cover story.  

Apart from the governance issue at NSE, a cause for greater worry is the systemic risk that a monopoly poses to the Indian capital market. The ham-fisted approach of the regulator in handling the co-location investigation or framing rules for algorithmic trading clearly leaves a lot to be desired. And critical issues such as interoperability between the clearing corporations of the two exchanges now only look like a distant dream. One can thus only hope that with a new CEO at the helm, the exchange puts the worst behind, especially as it gets closer to a public listing. 

Among other stories, we take a look at why tobacco-to-hotels major ITC is trading at a substantial discount to other FMCG peers. There is also a feature about the change underway at the country’s second largest commercial vehicle manufacturer, Ashok Leyland and an update on the management turmoil at Infosys.