'The focus at NSE is back on governance': MD & CEO Ashishkumar Chauhan on economy, markets and more

India’s capital markets are counted among the most well-regulated and stable ones globally. The National Stock Exchange (NSE) is right at the top globally in terms of the number of trades that take place on it. NSE MD & CEO Ashishkumar Chauhan, 55, wants to focus on the bigger role that bourses can play in the overall economic development of India. Chauhan, an IIT and IIM alumnus, has the unique distinction of heading both the leading bourses, BSE and NSE. In an interaction with Business Today’s Sourav Majumdar and Ashish Rukhaiyar, Chauhan says that Indian exchanges are jointly working towards channelling more household savings into the financial assets space even as they continue to make investors aware of the risks. Edited excerpts:

Q: The economy is facing a lot of headwinds due to a combination of geopolitical and macroeconomic concerns. What is your take?

A: There are wars happening and inflation is also rising. In some ways, India has done well when compared to most of the other economies. [The] Indian currency is also one of the better-performing currencies against the dollar. That clearly says that something has changed over the last eight to 10 years. India was once considered one of the ‘fragile five’ economies; now that kind of terminology is not used to describe us. Our services exports have helped us quite substantially and that is, in some ways, the future of India and the future of the world. The world is moving towards dematerialised services and dematerialised experiences and India is at the forefront. But in the short run, there can be lots of ups and downs. This government has been able to create buoyancy in taxation through automation of GST. It has built a lot of soft infrastructure which... is going to take India very far in terms of managing itself and also preparing its population for future wealth creation, growth, cohesion and integration, among other things.

Q: Do you think India’s digital public infrastructure (DPI) has been a key game changer?

A: The soft infrastructure I referred to is DPI. And in some ways, NSE was the harbinger of DPI in India. DPIs have helped India become important internationally and also raise the bar in capital formation and providing information. Our regulators have also played an important role in the ecosystem, given their forward-thinking approach. In terms of corporate governance and investor protection as well, we are among the best in the world. Since Independence, this is the first time that we are not being taken over by circumstances. India is now much evolved in terms of mindset.

Q: Where do stock exchanges feature in the larger scheme of economic development?

A: Our job is to act as frontline regulators and also provide services for transactions in stocks. These are the two large jobs wherein one provides liquidity and the other creates trust. The primary function that an exchange does in any economy is provide clean and sharp prices along with sharp and authentic information to make the market robust and efficient. Our job is taking information from the companies and putting it out quickly and ensuring that trading, clearing and settlement happen without any glitch. But since people think we are an authority and a regulator, they ascribe many powers to us that we do not have. Young investors today have more money to spend, which is creating demand. They also have more money to invest and save and that is where we need to help inculcate better investment behaviour, which will allow them to save for their retirement, children’s education, etc. That is the duty of any exchange or regulator—point them in the right direction and, if needed, make regulations that nudge them to do so.

Q: How can more savings be channelled towards investments?

A: Creating awareness is important and between the established exchanges today, a large number of investor awareness campaigns are done every year. More importantly, it is also about examples... investors who stay disciplined and stay within the regulatory framework, and make money. When society sees those examples, they want to emulate them. Today, we have more than 80 million investors. When I joined this industry around 30 years ago, there were hardly 2.5-3 million investors... As a society, even as we are more socialist in nature and give more importance to banking and less importance to the market, market-based capital allocation accounts for one-third of our wealth. That clearly shows that an increasing number of people are coming to the markets. As an exchange, the aim is to ensure we bring them to safer instruments, especially when they are entering the markets. Hence, we promote mutual funds and portfolio management services that have the expertise to manage money.

Q: How do you see the compliance level among Indian corporates in terms of ESG?

A: Whenever a new regulation comes, companies comply in different ways and that is bound to happen based on their level of preparedness. On an overall basis, Indian corporates broadly comply with all regulations... In fact, many of our regulations are way ahead when compared to some of the developed markets. For instance, women’s representation on the board, and contribution of a part of the profits towards CSR, among other things. Our policymakers and regulators are quick in implementing [these].

Q: You joined NSE at a time when it was facing issues related to governance. What are the key focus areas that you have identified?

A: First and foremost, not to lose focus on the purpose of an exchange, which is a social purpose. Then working on capital formation and increasing the trust of the investing community on companies; [and] providing facilities to raise capital and safe transactions. If India grows, exchanges will be the fulcrum on which it grows because capital has to be raised, people need to get information and invest, there has to be corporate governance and the ability to transact in a safe and regulated environment. Also, [there will be] more and more instruments like electricity, bond futures, or carbon trading… Our job will be to act as front-end regulators and not to lose sight of the focus areas. An exchange is also a utility, and as a utility, no one cares [about] how much money we make. What people care [about] is whether you are able to manage corporate governance for the companies listed on the exchange, whether the transactions are happening without any fear or concerns and that will hold true for centuries. An exchange manufactures trust for all the stakeholders.

Q: Do you think NSE would be your biggest challenge given the issues around it?

A: In terms of achievements, I think setting up the NSE is my biggest achievement. Everything else pales [in comparison] as what it has done for India is beyond everything else. It was the first DPI of the country. When I got a chance to come back to the NSE, some had apprehensions... But someone has to do the job.

Q: Given NSE’s financials, it wouldn’t be wrong to say that it is a blue-chip company. In that context, when will NSE list?

A: It is difficult to predict when the listing will happen as Sebi (markets regulator the Securities and Exchange Board of India) has to take a final call on that. Our job is to run the exchange as an exchange... The focus is back on governance and its core functions along with investor services while facilitating companies to raise capital and becoming a place where the public benefits. We used to have technical issues but in the last one and a half years, while the number of trades has more than doubled, there has not been any technical issue.

Q: Do you see BSE as a competitor?

A: Society requires many more players... We are 17 per cent of the global population. In the West, exchanges have become businesses. In India, the government or regulator does not look at exchanges as businesses. We are public infrastructure and we have to work for public interest... NSE and BSE are not competing as companies are listed on both, the same set of regulations apply to both, and even the brokers and investors are the same on both. There is a lot of co-operation and competition would be just 0.001 per cent.

Q: NSE is already the world’s largest derivatives exchange in terms of the number of contracts traded, but it still wants to have longer trading hours. Is it really the need of the hour?

A: We were the first automated exchange and even though we used to trade for only two hours officially, trading activities used to happen throughout the day. Over the years, our trading hours have increased and while the rest of the world automated later, they now trade for over 20 hours daily. Technology allows us to increase the trading hours and it is in the interest of the investors, not just the traders. Yes, there is a cost component... We have sent the proposal to Sebi.

Q: A Sebi analysis shows that while the derivatives segment registered an exponential rise between FY19 and FY22, a vast majority of individuals experienced losses...

A: Derivatives are risky and leveraged instruments and if one is not an expert, one should stay away... As an exchange, it is our job to make people aware and so we do a lot of campaigns... though we are a company or a business, our responsibility is towards society. Savings are precious as that takes care of the family in future and so it is important that investors get involved in instruments that they understand and are safe from their risk perspective and suits their profile.

@TheSouravM, @ashishrukhaiyar

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