Unlisted NSE Shares Surge, Leaving Buyers in the Lurch

Mumbai: A recent rally in the unlisted shares of the National Stock Exchange (NSE) has created a stir in the market, leaving some buyers empty-handed as sellers back out of deals.

The unexpected surge in prices, fueled by hopes of an imminent listing and attractive valuations, has led to a surge in investor demand and a significant supply crunch.

Factors Driving the NSE Rally

The NSE shares in the unregulated market, where companies preparing for listing are traded, have soared as much as 9-10% to a record high of ₹1,680-1,700 apiece since May 6. This follows the company’s release of its earnings for the quarter ended March.

Several factors have contributed to this surge:

Imminent Listing: Investors are betting on an upcoming listing for the NSE.
Attractive Valuations: The current valuation of NSE shares is seen as attractive compared to its listed competitor, BSE.
Dividend Announcement: NSE declared a rich dividend of ₹35 per share, further boosting demand.
Market Share Stabilization: NSE CEO Ashishkumar Chauhan stated that the market share loss to BSE in the equity options segment has stabilized, easing concerns among investors.

Supply and Demand Imbalance

The surge in demand, coupled with institutional shareholders holding onto their shares in anticipation of the listing, has created a significant supply-demand gap.

Narinder Wadhwa, managing director of SKI Capital Services, said, “Deals for NSE shares had been “falling through” in the past two weeks as retail and HNI (high net-worth individual) demand for the unlisted shares had spurted”.

Delivery Issues and Counterparty Risk

This imbalance has led to some buyers facing difficulties in receiving their shares as sellers back out of deals after the price surge.

An executive from a broking company, requesting anonymity, explained, “It’s quite possible that some deals which were outstanding might have fallen through as this is an unregulated, over-the-counter market where counterparty risk cannot be insured, unlike on an exchange where the clearing corporation stands guarantee to all settlements being honoured.”

Looking Ahead

While the NSE is yet to comment on the situation, the surge in demand and resulting delivery issues highlight the complexities and risks associated with trading in unlisted shares.