In the latest episode of the Simple Hai! show, veteran finance journalist Vivek Law hosted Sundararaman Ramamurthy, Managing Director and CEO of the Bombay Stock Exchange (BSE), offering a rare glimpse into the mind of a man Law describes as an “architect of the modern stock market”. As BSE celebrates its 150th anniversary, Ramamurthy shared profound insights into market evolution, investor protection and his vision for India's financial future, emphasising that “Old is not necessarily always gold”.

Democratising Access and Information

Sundararaman Ramamurthy lauded the significant transformation in India's stock market over the past three decades, particularly the democratisation of access and information. He highlighted how technology has dissolved geographical barriers, ensuring that an individual in Mumbai, the North East, or Kashmir now has the same speed and access to information as anyone else. This is in stark contrast to earlier times when regional stock exchanges, like Chennai or Vadodara, would only offer stocks listed in their respective regions. Today, the entire nation operates on a level playing field in terms of market access and information.

Combating Uninformed Trading and Greed

Despite the advancements, a significant concern remains the prevalence of uninformed trading. Ramamurthy cited a SEBI report from the COVID-19 pandemic period, revealing that nine out of 10 people engaging in trading, especially in Futures & Options (F&O), lost money. He cautioned against the "greed" that drives individuals to seek quick riches, drawing an analogy: “If you plant a mango tree, mangoes don't appear the next day; it takes five years. Everything takes time”. Similarly, he stressed that investments, particularly in an index fund, require patience, typically three to four years, to yield benefits.

To counter this, BSE and SEBI are intensifying efforts to boost investor awareness and knowledge. BSE alone conducts approximately 15,000 investor awareness programs annually, reaching around 8 lakh people. These initiatives include educational videos and street plays during events like World Investor Week, all aimed at ensuring investor safety.

The Persistent Challenge of a Level Playing Field

Ramamurthy acknowledged that achieving a truly level playing field remains a work in progress. Since joining BSE two and a half years ago, he has identified several disparities:

- Margin Release Issues: Some mobile applications used by retail traders still charge margins on both sides when an investor buys on NSE and sells on BSE, despite interoperability that should release the margin for the broker.

- Exchange Selection Restrictions: Certain apps force investors to choose a single exchange for life, or to toggle between exchanges daily, limiting their flexibility.

- Information Display Bias: Many applications prioritise one exchange's stock symbols, making it difficult for investors to compare prices across exchanges to find the best deal.

- KYC Duplication: Legally, prior to August 2024, an investor needed to complete separate KYC (Know Your Customer) procedures with the same broker for different exchanges even for the same equity market. This "unnecessary" requirement has since been changed.

- Common Contract Note: Discussions are ongoing to introduce a common contract note, further simplifying processes.

Ramamurthy confirmed that these issues are being addressed with brokers, albeit slowly, to prevent losses for their own clients.

Evolving Investors in a Digital Age

The market has transformed dramatically from 30 years ago when investors physically visited stock exchange buildings or broker offices to place orders. Today, the market is literally "in the customer's pocket," accessible with a single touch, with instant bank transfers and digital depository services. 

Unlocking the Potential of SMEs

A key mission for BSE is to significantly increase the listing of Small and Medium Enterprises (SMEs). India boasts over six crore SMEs, contributing substantially to exports, GDP and employment generation, yet only around a thousand SMEs are listed across both exchanges. Ramamurthy envisions this number reaching at least 6,000 in the next decade.

He explained that while SMEs are "Subject Matter Experts" in their businesses, they often lack knowledge in corporate governance and finance necessary for listing. The process of bringing them to market is akin to finding "diamonds" amidst many "stones.". BSE has developed an AI system, combining Large Language Models (LLM) and Generative AI, to process Draft Red Herring Prospectus (DRHP) documents from SMEs. This system generates four types of reports in just 20-30 minutes, a task that previously took a human analyst three to four weeks. These reports include:

1. SEBI compliance checklist.

2. BSE's internal checklist.

3. A list of further questions for the company, based on details like Offer for Sale (OFS) percentage, promoter changes, preferential issues, and related party transactions.

4. Public domain checks for any past actions by enforcement agencies (ED, CBI) or reports of fraud related to the company or its promoters.

This expedited process is crucial for bringing more SMEs to the market, which Ramamurthy believes is "mandatory" for India to achieve a $50 trillion market capitalisation as part of its "Viksit Bharat 2047" vision. Global Competition and “Customer Delight” Ramamurthy emphasised that market competition is no longer just national; it's global.