Sebi move: BSE, NSE stocks set to soar

Share prices of the two top stock exchanges – the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) — are expected to rise after the Securities and Exchange Board of India (Sebi) proposed to allow domestic institutional investors (DIIs), insurance firms and banks to hold up to 15 per cent stake in these exchanges as against the current limit of 5 per cent.

This proposal has been extended to other 18 recognised stock exchanges in the country as well. The move has come after Sebi received submissions from “certain existing shareholders of NSE who have expressed problems in fetching appropriate value for their investments and getting eligible buyers”.

Stock market sources expect NSE, which is quoting at Rs 3,500, to benefit the most from this Sebi move. The bourse’s share prices were under pressure because some DIIs and banks, which held over 5 per cent in the exchange, would have been forced to dilute their holding before the deadline of October 17, 2008. This date was set to bring down the holdings to the earlier stipulated level of 5 per cent.

For instance, big players like State Bank of India, the country’s largest bank, has an equity holding of 8.5 per cent and Stock Holding Corporation of India has a 7.11 per cent stake in NSE. To reduce their holdings in the exchange, they would have had to dilute 3.5 per cent and 2.11 per cent respectively.

“The demand for the shares is likely to grow after this development,” said Deven Choksey, Managing Director, K R Choksey Share and Securities.

“Reduction of shareholding would have been next to impossible, considering the global credit crunch and the bearish market sentiment. Since the foreign direct investment (FDI) limit of 26 per cent has also been reached and individuals can hold only 1 per cent, there would have been few big takers,” said an official of an investment bank.

Even the BSE share, which is quoting at 5-10 per cent lower at around Rs 4,800, is expected to recover. NSE is currently valued at $4 billion, while BSE, the country’s oldest exchange, is valued at $1 billion.

Last year, Deutsche Borse acquired a 5 per cent stake in BSE at Rs 5,200 per share.