NSE, MCX in merger talks, could submit proposal to Sebi; crucial for bulls in the coming week

NSE, MCX in merger talks, could submit proposal to Sebi; crucial for bulls in the coming week

The National Stock Exchange (NSE) and the Multi Commodity Exchange (MCX) entered into merger talks ahead of the implementation of the universal exchange framework in October, said a top official. The two entities are planning to approach market regulator Securities and Exchange Board of India (Sebi) as early as this month, according to the official.

Both the exchanges have readied a blueprint for the merger proposal which will be discussed with Sebi.Sources say NSE entered talks with the commodity bourse soon after the market regulator allowed exchanges to dabble both in the equities and commodities space. The decision was taken by the Sebi board at its December 2017 meet.

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Commodity space is still evolving and has great opportunity to develop in the current scenario. So, having a dominant player will help bring in lot of economies of scale,” explained a person in the know.

In the equity derivatives space, NSE has near monopoly, while in commodity derivatives MCX enjoys a lion’s share of 90 per cent.

Currently, MCX has a market capitalisation of Rs 37 billion. In comparison, NSE is much bigger. In December 2016, when NSE filed its offer document with Sebi, it was looking for a valuation of Rs 400 billion. Since then, the valuation has increased further thanks to a good uptick in trading volumes.

Market experts say the merger could be a win-win for both exchanges as competition is set up intensify post October as all existing bourses will look to foray into new segments.

The Nifty50 is now trading above its crucial short-term moving averages and today’s intraday low of 10,524 will be of big importance in the coming week, suggest experts. A break below this level could again put further pressure on the index amid expiry week volatility.

The Nifty50 which opened at 10,533 slipped marginally to hit an intraday low of 10,524. Bulls took control of the index and pushed Nifty above 10,600 to hit an intraday high of 10,628 before closing the day at 10,605, up 91 points.

On the other hand, MCX will need huge capital if it wants to aggressively foray into the equities space.

The proposal could also address NSE’s pet peeve–going public. Despite mounting shareholder pressure, NSE has not been able to list due to legacy issues. As MCX is already listed, the merger could lead to back-door listing for NSE, say experts.

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