MOSL: THEMATIC | Exchanges-The confluence of growth drivers-Trio of Economy, Reforms and Technology to fuel multi-year growth

​THEMATIC | Exchanges: The confluence of growth drivers; Trio of Economy, Reforms and Technology to fuel multi-year growth

The increasing share of savings into financial assets over physical assets offers long growth runway for capital market ecosystem including Exchanges

The Regulator’s push to evolve asset classes, more evident in the case of commodity derivatives exchanges, should help bring maturity in segments other than equities.

We believe MCX is well-placed to ride the reforms in commodity derivatives (Buy). BSE is an Option value on new segments, which may take time to scale (initiate with Neutral).

Increasing Retail penetration has a long growth runway ahead…

Per-capita demat accounts in India stand at 0.03, ~19x lower than bank accounts. Only 40% of savings are in financial assets and 60% still in physical assets. Only 5% of financial savings are in equities in India, much lower than 15-40% in regions such as China, Brazil, Western Europe and the US.

India's trading measures, such as the market cap-to-GDP ratio and cash turnover velocity, are well below historical peaks, implying accelerated growth potential in economy up-cycle. Cash turnover velocity also suffers from low free float in the country v/s global peers, but free float has been gradually increasing, which is encouraging.