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Lunch with BS: Chitra Ramakrishna

Long-playing record

Shyamal Majumdar & Sachin Mampatta  |  Mumbai 

Chitra Ramakrishna
Chitra Ramakrishna

Chitra Ramakrishna, MD & CEO, National Stock Exchange may have little time to practise the veena but her playbook is full, with plans to take the Nifty to many more countries, write Shyamal Majumdar and Sachin Mampatta

The Yauatcha restaurant at Mumbai's Bandra Kurla Complex (BKC) seems to be in love with loud music. There is music playing loudly from the area in front of the hotel from speakers hidden in the shrubbery. Up a narrow staircase, past the wine coolers, is the dining area and the music has followed us there as well, even to the "quietest" place that the staff can find for us. We ask if it can be turned down a bit but are informed politely that it is all part of the ambience.

Chitra Ramakrishna, who was part of the first team at the National Stock Exchange (NSE) that succeeded in turning off the noise on the trading floors over 20 years ago, seems to be having no problem with the high decibel level at the restaurant, which is just a couple of minutes away from Exchange Plaza, NSE's headquarters since 2001. The original venue for the lunch was the seventh floor lawns at Exchange Plaza where, we were told, we can eat anything we want, though Ramakrishna would stick to her favourite curd rice. But the plan was changed on account of the rains.

Though the restaurant is full, the starters - an elaborate variety of fried turnip cake, crispy asparagus pumpkin & corn rolls and stir fried chicken - come pretty fast.

Ramakrishna's passion for Carnatic music and playing the veena has been much talked about as her "only interest outside work", but Ramakrishna says her mother will not be amused if she claims she does practice regularly. Her passion, thus, is limited to attending sundry Carnatic music concerts. "Getting the best seats even at the last moment is easy now. It seems people are too busy to spare time for music," Ramakrishna says, even as she checks her mobile for incoming mail.

The world of Carnatic music may have lost a possible concert performer but NSE is unlikely to regret that. Ramakrishna is currently the third woman to head an exchange in the Asia-Pacific region after Sri Lanka's Colombo Stock Exchange and China's Shenzhen Stock Exchange. And she's been part of the NSE's explosive growth since its inception, so in some senses her journey has been NSE's journey.

She has much to be proud of. In March 1995, the exchange had 135 companies and the daily average turnover for equities was barely Rs 17 crore. Today, it has over 1,600 actively traded companies and the average daily turnover in the cash segment has grown 43 per cent annually to around Rs 15,000 crore. Today, NSE has a combined daily average turnover at Rs 2.40 lakh crore and a market share of 75 per cent in both the cash and derivatives segments.

To put all of that in perspective, NSE's combined average daily turnover is almost three times higher than BSE's. In the last financial year, the exchange had a net profit of Rs 966 crore and the return on equity is 17 per cent, compared to seven per cent for BSE.

That's quite a journey from the days when Ramakrishna was one of the five hand-picked by the legendary S S Nadkarni, then chairman of IDBI (she had joined IDBI in 1983 after her chartered accountancy). NSE, which was set up as a part of the government's efforts towards transparent trading, operated from a small office at Mahindra Towers in Mumbai's Worli. "We were perceived by many as a bunch of outsiders who would never succeed. That in a way worked to our advantage as we had nothing to lose and were free to experiment," Ramakrishna, 52, says, helping herself to a small portion of dumplings.

Among many other things, she was instrumental in setting up a pan-India VSAT network and building the infrastructure and legislative framework for India's first depositor.

Though she has never invested in stocks, her interest in the world of securities developed in the late eighties when she joined a team that was closely involved in drafting the legislative framework of the Securities and Exchange Board of India (Sebi). Though little came of it, Ramakrishna says the exposure was fascinating because she gained knowledge of global best practices in securities and came in direct contact with some of the finest minds in Indian industry.

It's time for the main course. Curd rice is obviously not on the menu, but noodles are and there is also rice along with stir-fried French beans, vegetable chive dumplings and chicken clay pot.

Ramakrishna says there is a need for more players in the exchange space to boost competition, prompting us to ask whether that view is different from the regulator's. After all, among other things, Sebi has raised barriers for entry through net worth norms for stock exchanges, clearing corporations and depositories.

Her lengthy answer will no doubt please the regulator. "After the 2008 crisis, there is a greater awareness and sensitisation across the world to systemic risk, market integrity and the quality of markets that we are creating. So regulators across the world, not just in India, are thinking about ways to make the markets safer and sounder," she says.

The answers to other questions are played with an even straighter bat. For example, how does she look at the controversial regulatory move to take away a quarter of exchange profits to a fund to guarantee exchange settlements? Or, why hasn't the long-awaited volatility index derivative taken off yet? Or, how does she react to a few of NSE's minority investors' pet peeve that the exchange isn't doing much on their concerns for a decent return on their investments even though it is sitting on Rs 2,847 crore of cash?


The answers are quick one-liners. Decisions on profit transfers are a regulatory call; products take time and tweaks will depend on market feedback; and shareholders will decide on the issue of returning cash.

The answers to other issues are far more affirmative. She wants to take the Nifty to more countries. Exchanges in London, Paris, Hong Kong, Tokyo and Korea already have Nifty Exchange Traded Funds or ETFs. And so do Germany, Singapore, Italy and Tokyo.

"With India becoming an attractive destination, everyone wants a proxy. And Nifty is the logical proxy for anyone to invest in. So I have a huge amount of work remaining in ensuring that Indian assets are available and distributed in a lot of other destinations" (Nifty is now in 32 destinations).

Ramakrishna says there is a huge opportunity to grow inorganically in a market which has not even scratched the surface. She is an ardent advocate of ETFs, which are low-cost, easy to understand and transparent. She believes the product has huge potential to grow in India as the proportion of household savings in equities is still in single digits.

There are two different requirements - institutional and high-end investors require complex, sophisticated products meeting different needs of their risk profile and so on, while the mass retail investors need simple products that they can invest in. "As an exchange, it is our business to provide both ends of the spectrum," Ramakrishna says, adding if we can have good broad-based ETFs, that will be the kind of passive investment vehicle that any retail investor should be looking at.

She makes a case for channelling long-term retirement funds into the equity market. The reason is simple: A huge section of salary earners is really government employees and the reality is that the eight to nine per cent returns that they get don't even beat inflation. The challenge, therefore, is how to provide sound retirement planning through better fund management, diversification of portfolios, etc. "See, the Indian markets are one of the best benchmarked markets in the world in terms of delivery, costs and so on. It's only fair that the vast majority of savers benefit from this prosperity through better options and choices," she says.

Will the Employees' Provident Fund Organisation (EPFO) listen? So far, it hasn't. Even in its last meeting last week, the Central Board of Trustees of the EPFO rejected suggestions from the finance ministry on investing a portion of the funds in the equity market.

It's been over one and a half hours now and Ramakrishna is clearly in a rush, with the occasional buzz from her phone getting more frequent. She, however, joins us for dessert - beautifully presented chocolate hazelnut mousse - which she finishes quickly, and the closing bell for our lunch rings.

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First Published: Fri, September 05 2014. 21:54 IST
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