Liquidity key as MCX-SX set to start trading

MUMBAI Thu Feb 7, 2013 6:35pm IST

A broker (L) watches a TV news channel as another monitors share prices at a brokerage firm in Mumbai August 9, 2011. REUTERS/Danish Siddiqui/Files

A broker (L) watches a TV news channel as another monitors share prices at a brokerage firm in Mumbai August 9, 2011.

Credit: Reuters/Danish Siddiqui/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - India's new stock exchange MCX-SX said on Thursday it will launch equities trading on Monday in 1,116 listed companies as the bourse operator looks to compete aggressively against the country's two established players.

The number of available counters announced by MCX-SX in a statement is about two-thirds of the 1,665 offered by dominant player National Stock Exchange and a fraction of the 5,191 in the older BSE Ltd as of the end of December, according to data from World Federation of Exchanges.

However, these numbers include thousands of illiquid stocks, making it a far less important barometer for traders, most of whom welcome MCX-SX entry as trading costs are expected to fall as the three exchange compete for market share.

Whether MCX-SX can succeed in a country where the value of shares traded remain a fraction of those in the Shanghai Stock Exchange will depend mainly on how successfully the bourse can attract liquidity, especially from established brokers.

"Liquidity is going to be a challenge for MCX and they will have to act to get market makers initially for most instruments," said Abhay Jain, equity advisor at SSJ Finance and Securities in Mumbai.

MCX-SX, controlled by commodity bourse Multi-Commodity Exchange of India Ltd (MCEI.NS) and trading software provider Financial Technologies (India) Ltd (FITE.NS), will start trading operations on Monday after a long regulatory approval process.

Equities trading is dominated by NSE in India, which has overtaken older BSE in trading volumes.

The total value of share trading in the NSE reached $526.1 billion last year, compared with $110.3 billion on the BSE, according to data from World Federation of Exchanges.

But combined that's only about a quarter of the $2.6 trillion traded in China's Shanghai stock exchange last year, according to the same data.

MCX-SX is betting trading volumes will grow substantially in coming years as the Indian government pushes initiatives to bolster mutual fund and insurance investments in a bid to bring more retail investors into stock markets.

That is looking like an uncertain bet so far. Net outflows from equity-focused funds reached 108.16 billion rupees last year according to data from the Association of Mutual Funds in India.

Those redemptions have come as investors have cashed in the more than 20 percent gains in the Sensex and Nifty last year.

"It may be successful with new breed of professionals initially," said G. Chokkalingam, chief investment officer at Centrum Wealth Management in Mumbai.

"But in the long run they need to tap successful, higher end broker members."

(Editing by Kim Coghill)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Markets

REUTERS SHOWCASE

Segway in India

Segway in India

Segway’s India business pegs hope on tech-savvy Modi  Full Article 

Power Outage

Power Outage

Mumbai hit by power cuts  Full Article 

Commodities

Commodities

Gold imports, premiums to jump on festive demand - top refiner  Full Article 

Economic Worries

Economic Worries

Pakistan's promises to IMF in doubt as protests sap economy   Full Article 

Islamic Finance

Islamic Finance

Basel III deposit challenge looms over Islamic banks   Full Article 

Antitrust Probes

Antitrust Probes

U.S. business lobby says concerned China antitrust probes unfair.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage