‘India Can Withstand Brexit Fallout’

Ashishkumar Chauhan, (right) MD of Bombay Stock Exchange

Meghna Mittal meets Ashishkumar Chauhan, MD of Bombay Stock Exchange (BSE). He says India story will remain intact through Brexit spillover effect

Ashishkumar Chauhan, (right) MD of Bombay Stock Exchange
Ashishkumar Chauhan, (right) MD of Bombay Stock Exchange

Indian markets fell the least amongst the majority of emerging markets post Brexit, and the story will remain intact even through the long term spillover effects of Brexit, the Bombay Stock Exchange (BSE) has said.

“If you analyse, India has fallen the least amongst most emerging markets. And that shows how strong the India story has been in the minds of people. If India outperforms even in a falling market, this story will remain intact,” BSE Managing Director and Chief Executive Officer Ashishkumar Chauhan said.

“The Brexit brings to the fore the weakness of the developed markets. We are part of the emerging markets in terms of investment portfolios. The volatility in the developed markets affects even emerging markets in some ways. But India has been a different story. And India has been literally the only shining star,” he said.

In the interview Chauhan talks about making BSE an investment bourse, bringing about the best in BSE, BSE Sensex as the barometer of Indian economy and new measures to prevent black money being invested into the stock market. Here are some excerpts:

Q. Can there be long term effects of Brexit spillover on the BSE?
A. I don’t think FPIs (foreign portfolio investors) would be so worried about investing in India at this stage. In fact, they would be rather discussing and thinking about how to allocate more because this is one story which is not that tentative vis-a-vis Europe, which now looks very volatile.

And a lot of people who are currently not serious about India or investing less than what they should be investing here, will start investing in India. In fact, the Morgan Stanley Capital International (MSCI) decision not to include China has also positively impacted India’s investment prospects vis-a-vis the FPIs.

(World’s largest indexing firm MSCI, last month refused to include China’s A-shares in its global indexing table.)

Q. How does BSE compete globally?
A. With the help of Frankfurt stock exchange operator Deutsche Boerse, which is a strategic shareholder, BSE has put in place technology that provides a competitive edge to the exchange in terms of its order-handling capacity, speed as well as throughput.

It is Asia’s oldest and now fastest stock exchange in the world with a speed of 6 microseconds.

The S&P BSE Sensex is taken to be the barometer of Indian economy and is called “India’s Index the World Tracks.” BSE has a tie up with New York-based S&P Dow Jones to provide a full array of indices enabling global and domestic investors to participate in India’s development story.

Q. Concerns have been raised over high-frequency trading. Comment.
A. Yes, concerns have been raised over high-frequency trading. Many countries want appropriate action to assure people that algorithm trading is not unfair. The Securities and Exchange Board of India has taken steps that other market regulators have followed elsewhere.

Whenever new regulations come in they are opposed by market players, but later they are found to be good. We comply with all regulations in letter and spirit. All decisions are taken after discussions with retail and institutional investors.

Q. Are penny stocks an easy option to divert black money into exchanges? What steps is BSE taking to prevent it?

A. In a bid to prevent black money being invested in shares, BSE has created various price bands for scrips on weekly, monthly, quarterly and annual basis for early deduction of illegal money flows. Over last one year since September, in addition to daily price bands of 5, 10, 20 per cent, BSE has also created weekly price bands, monthly price bands, quarterly price bands and annual price bands.

The price range set by BSE are in addition to the daily circuit filters or price bands imposed to restrict the movement of stock prices (up or down), of listed securities.

BSE regulatory strategy continues to evolve to ensure that whatever we do is defined in regulations, is transparent and fairly applied. We need to be very careful in framing our regulations, so it is an evolving process. BSE will continues to consult and engage and do whatever is required to make markets more safe. We would do whatever it takes to ensure that markets are safe for investors.

Q. What is the status of the commodity derivative platform, to be started by BSE?

A. We are awaiting approval from Sebi.

Q. Tell us about the international exchange, which is to come up in Gujarat? What is its status?

A. BSE is in the process of setting up a new international exchange in GIFT City (Gujarat International Finance Tec-City), which will trade in equity derivatives, currency derivatives, interest rate derivatives, etc. in Gandhinagar soon. The regulatory process takes its time. These are regulatory procedures, our board has given approval, BSE will apply to Sebi now.