The goose that once laid golden eggs has since derated into a regular goose. Asia’s oldest stock exchange BSE and its benchmark Sensex make for excellent cocktail chatter, but over the past three years the exchange’s stock has delivered -9% annual return compared to Sensex’s 15% (See: Chasing the benchmark). After hitting an intra-day high of ₹1,200 on its listing day, the stock has been on a steady roll downhill. Shareholders who have held on since its IPO, priced at ₹806, have not seen any capital appreciation.
Will the BSE remain a regular goose forever?
The BSE has history, legacy, controversy, and longevity on its side. It was one of the worst monopolies pre-1993. Since then, after the advent of the NSE, it is on the backfoot. As of last count, 3,913 stocks traded on the BSE with total market cap of $2.8 trillion. Yet, the exchange itself is valued at $350 million. If you look at how online brokers or other fintech start-ups are valued, it seems ironic that the underlying beneficiary of the market expansion – the exchange – is valued at a fraction of that. There is clear dichotomy in how the frontend is getting valued versus the backend.
Within the exchange space itself, the gulf is very wide. At one end, there is NSE which is being valued at $7 billion versus the BSE’s $350 million. That chasm is an outcome of NSE’s overwhelming