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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

This article was written by

Analyst’s Disclosure: I/we have a beneficial long position in the shares of BBWI either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Mumbai: For almost a decade, BSE—Asia’s oldest stock exchange—was India’s only listed equity exchange. Investors seeking exposure to the country’s booming capital markets had just one listed route. That exclusivity helped create a scarcity premium — investors weren’t just buying earnings, they were buying the only listed gateway to India’s exchange business.

That dynamic is now facing a reset. On June 17, NSE filed its listing papers with market regulator Sebi, and is targeting a listing before January 30 next year. Early estimates put the issue size at close to Rs 30,000 crore, based on NSE’s unlisted valuation of Rs 5 lakh crore. BSE’s market capitalisation at Thursday close was Rs 1.58 lakh crore.

NSE shares will list exclusively on BSE, since under Indian securities law an exchange cannot list on its own platform—a regulatory symmetry that will hand BSE one of its most consequential listings.

Exchange vs Exchange
On its part, BSE has framed the development as a positive rather than a threat to its own valuation. “Listing of any eligible institution is a positive development for India’s capital markets,” said managing director Sundararaman Ramamurthy. “Valuations and stock prices are outcomes of a company’s growth prospects and execution, and are best left to the market.”

NSE commands 88% of cash-market turnover, 91% of equity futures and options, and 89% of interest-rate futures. In currency derivatives, its share is 74% in futures and effectively 100% in options. Globally, NSE ranks first in equity derivatives contracts traded—with a 51% share—and third in the number of cash-equity trades.

Yet the listing papers also discloses a rare stumble. Total operational revenue declined 3% year-on-year to Rs 16,601 crore in FY26, from Rs 17,141 crore in FY25. Profit fell 16% to Rs 10,302 crore, from Rs 12,188 crore in FY25. The exchange attributed the decline to lower transaction charges, softer trading activity, and the impact of Sebi’s tightening of the futures and options segment—the very regulations that have reshaped the derivatives landscape across both exchanges.
That creates an unusual valuation setup. NSE is cited at 38x to 43x FY26 price-to-earnings on IPO price band assumptions of Rs 1,600 to Rs 1,800 per share, compared with BSE trading at 69x FY26 earnings.In other words, the dominant exchange may come to market at a significant discount to its smaller rival—at least on near-term multiples—partly because it is bearing the brunt of the same regulatory changes BSE has so far navigated better.

Two Sides
Investors are divided on the new equilibrium. As Investor Vijay Kedia says, “Scarcity premium may reduce once NSE gets listed because investors will get an opportunity to own the larger exchange as well, but BSE does not lose its importance.”

Pankaj Murarka, CIO at Renaissance Investment Managers, takes a longer view. Exchanges typically command rich valuations due to their oligopolistic structure and high entry barriers, he argues, and both NSE and BSE can sustain strong multiples—though NSE is likely to command a premium given its dominant market share. BSE’s trajectory, he said, will depend on whether it can meaningfully gain share in options, futures and cash equities, and expand into new product segments.

A listing of NSE—valued at Rs 5 lakh crore—exclusively on BSE could itself prove a fillip. “It may result in enhanced liquidity, business and participation by institutional investors at BSE,” said Parmod Kumar Bindlish, a former Sebi official.

BSE’s Revival
The debate arrives at a moment of transformation for BSE. When Ramamurthy took over as MD in January 2023, the exchange reported FY2022 revenue of Rs 928 crore, profit of Rs 254 crore, and a market cap of Rs 5,742 crore. By FY2026, revenue had risen to Rs 5,226 crore—up 41% CAGR—and profit to Rs 2,497 crore, an increase of 58% CAGR.

The markets have taken note, with valuation surging more than 20-fold since he took charge.

Ramamurthy attributed the turnaround to “innovation, product development and execution”—reviving the equity derivatives business, acquiring a 50% stake from S&P Dow Jones Indices in the index venture, upgrading mutual fund platforms to handle surging volumes, and stepping up investments in technology and member connectivity.

“When we started, both systems and the culture were somewhat archaic and lacked vibrancy,” he said. BSE filled long-standing vacancies, brought in a fresh set of C-suite leaders and hired younger professionals. Some of the changes were basic but necessary, he added, noting that even employee facilities such as a proper cafeteria needed attention.

The strategy in derivatives, he added, was not driven by market share targets but by “the voice of the customer.”

On Sebi tightening options trading, he said investor protection and market development “must go hand in hand,” and that markets “naturally adapt to evolving regulations over time.” Derivatives trading revenues more than doubled to Rs 3,134 crore in FY26, with daily average premium volume rising 118% to Rs 19,522 crore.

Kedia believes NSE’s listing will prompt investors to compare the two exchanges more closely. “The exchange that grows faster and creates more value for shareholders is likely to command a higher multiple,” he said.

Murarka offered perhaps the most durable framing: “Markets can go up or down, but in casino parlance, the house never loses. Exchanges are the house.”

A massive structural shift is underway in India’s mutual fund landscape. Anil Ghelani, Head of Passive Investments at DSP Mutual Fund, predicts that low-cost passive funds, currently holding a 17% market share, will command 30% of the industry’s total assets within five years. This explosive growth marks a permanent evolution in how Indian retail investors build long-term wealth.

Passives are becoming increasingly popular in India with the launch of several new products suited to meet the needs of different kinds of investors. How popular do you think ETFs will become in the next five years?

In the US, we have already seen passive funds, i.e. ETFs and index funds, take over in size, with AUM exceeding 50% of the total mutual fund industry. In India, we are gradually seeing this growth. Today, ETFs and index funds account for about 17% of the total mutual fund industry AUM, which, in my view, could grow to 30% in the next five years.

However, the more interesting trend would not be the growth in the size of ETFs, but the evolution of investor behaviour. We often spend a significant amount of time trying to identify the next big stock idea or chasing a star fund manager, whereas there are more important aspects that we miss out on: prudent asset allocation aligned with our life goals, and staying invested until we reach them. ETFs and index funds will be natural beneficiaries of this shift.

In the coming years, passive investing is likely to become a much larger part of investors’ portfolios as a core allocation, while active funds will be selectively used as satellite allocations for alpha opportunities.

The consensus used to be that India is an inefficient market where active managers will always beat the index. However, information is now real-time, and alpha in the large-cap space is shrinking. In which segments do you think active management still holds an edge, and where is passive now the obvious choice?
While ETFs and index funds can be used across market-cap segments and sectors to build a portfolio, the largest AUM today is still in large-cap passive funds. In my view, the case for passive investing is strongest in the large-cap segment.In the small-cap and micro-cap segments, the stock universe is much larger, and there is greater potential for bottom-up research, management assessment and identifying under-researched stocks. So, active management may continue to have an edge in these segments and in certain niche sectors. That said, such outperformance potential often comes with higher volatility and manager-selection risk.

Hence, for core portfolio allocations, passive strategies are increasingly becoming the default choice. I have always believed that “and” is better than “or”. We will see a thoughtful blend where passive strategies form the core of a portfolio, while active strategies are used selectively in areas where alpha opportunities exist.

When an investor is looking at a theme, such as large caps, how should they decide between an ETF and an index fund? What are the liquidity and execution realities of trading ETFs on Indian exchanges that retail investors often overlook?

When investors compare an ETF and an index fund tracking the same benchmark, it is important to remember that both aim to deliver the same index return. The difference is primarily in the mode of access, not the underlying exposure.

For investors who prefer convenience and automated investing through SIPs, index funds are often a straightforward option. They do not require a demat account, and transactions happen directly with the fund house at end-of-day NAV.

ETFs, on the other hand, offer intraday liquidity, transparency and potentially lower expense ratios. They are useful for investors who already have a demat account and are comfortable transacting on exchanges. The choice is less about expected returns and more about convenience, flexibility and execution preference.

With multiple indices being launched by BSE and NSE, AMCs are following up with ETF NFOs. How do you view this trend?

The launch of many indices reflects the growing maturity of capital markets and the passive investment industry. However, every new index does not automatically need to become an ETF or index fund.

As a responsible fund manager, we ask whether it solves a genuine portfolio need or is just another option in an already crowded space. More choice is useful, but beyond a point, it can make decision-making harder. Simplicity is as important as innovation.

Broad-based market-cap indices should continue to form the core of most portfolios. Thematic, sectoral and factor-based products can play a satellite role where investors understand the risks and investment thesis.

Help us understand parameters like iNAV and tracking error before buying ETFs.

Many investors start by comparing an ETF’s size or expense ratio. Instead, one should first evaluate the underlying index: whether it is large, liquid and transparent.

Next, assess how closely the ETF tracks that index. Tracking difference is the gap between ETF returns and index returns, while tracking error measures consistency. Lower is better on both counts.

For ETFs, liquidity and execution also matter. Intraday iNAV helps assess whether the ETF is trading close to its underlying value. A good ETF tracks a large, liquid index efficiently and allows fair pricing.

What would be your advice for someone looking for a low-cost product for child goals over 10 to 15 years?

When investing for children, the biggest risk is emotional decision-making driven by greed and fear. Over long horizons, staying invested and maintaining the right asset allocation matters more than finding the best-performing fund.

A simple, low-cost approach would be an index fund. A disciplined SIP strategy aligned with the goal timeline, reviewed periodically with a financial adviser, would work best.

U.S. charitable giving had a good year, not a great year, in 2025, up 3%, adjusted for inflation, to $617.2 billion. The big factor: bequests—gifts left through wills—which rose 16.5% to $62.2 billion, according to the Giving USA Foundation. Bequests have risen in three of the past four years, a pattern that holds over recent five-year periods, says Jon Bergdoll, interim director of data and research partnerships at Indiana University’s Lilly Family School of Philanthropy, which researched and wrote the report.

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Jefferies’ Christopher Wood has reallocated his flagship Greed & Fear portfolios to “increase exposure to tech hardware,” cutting selected Indian positions to fund bigger bets on South Korean memory champions SK Hynix and Samsung Electronics as the AI capex boom intensifies. He is pivoting towards what he calls the “picks and shovels” winners of the “mother of all cycles,” arguing that memory has become the core engine of the AI era and still looks cheap on earnings metrics.

Wood describes the ongoing AI build-out as “the most dramatic capex cycle Greed & Fear has ever seen,” with hyperscalers and foundries ramping up spending at an unprecedented pace. Against that backdrop, he is explicitly “going to have to increase exposure to tech hardware in the various Greed & Fear portfolios,” adding SK Hynix and Kioxia to his global long-only book and increasing the weighting in Samsung Electronics.

In the updated global long-only portfolio, SK Hynix and Kioxia are included “with an initial 4% weighting each,” while the existing Samsung Electronics position is raised by one percentage point. “All this means that Greed & Fear is going to have to increase exposure to tech hardware,” Wood writes in his newsletter, emphasising that DRAM and NAND suppliers are at the heart of the AI trade three and a half years into the capex arms race.

Also Read | Chris Wood’s big warning: The specific risk that will finally trigger the end of AI trade

‘Mother of All Cycles’ and Jevons Paradox

The strategic shift is anchored in Wood’s conviction that falling token costs will drive explosive growth in compute demand, not a bust in AI usage. Citing Jevons Paradox, he argues that “falling token prices should lead to rising DRAM prices,” as cheaper AI services spur more usage and, in turn, greater consumption of memory and bandwidth.
“So the increased demand triggered by cheaper prices should be good for the picks and shovels plays, which have already been by far the main beneficiaries of AI in stock market terms three and a half years into the AI capex arms race,” he notes, adding that “for now at least, there remains zero sign of AI capex slowing.” With AI-linked data centre investment driving boom-like conditions in Taiwan and record export orders, Wood views the entire supply chain, especially DRAM, as central to what he calls “the mother of all cycles.”
Funding the Shift: India and Other Cuts
To fund this hardware tilt, Wood is trimming exposure in India and other markets rather than adding overall risk. In the Asia ex-Japan long-only portfolio, “an initial 4% will be re-initiated in Hynix by removing PolicyBazaar,” while a one-percentage-point cut to Alibaba helps finance an increased stake in Samsung Electronics.

The India long-only portfolio also takes a hit. “Finally, in the India long-only portfolio, the investment in Ambuja Cements will be removed, while the investments in GMR Airports, JSW Energy and Adani Energy Solutions will be reduced by two percentage points, one percentage point and one percentage point respectively,” the note states.

These reallocations free up capital to deploy into the South Korean and Japanese memory complex, underscoring Wood’s preference to fund the AI hardware trade by rotating within equities rather than increasing overall exposure.

Wood’s conviction rests heavily on structural changes in the DRAM industry and the evolving role of memory in AI workloads. He highlights Micron CEO Sanjay Mehrotra’s assertion that “memory has evolved from a peripheral component into the core engine driving productivity in the AI era,” and points to long-term strategic customer agreements (SCAs) as evidence of newfound pricing power.

Micron has signed 16 SCAs covering roughly 20% of DRAM volumes and a third of NAND volumes, typically with five-year terms, signalling greater visibility and discipline across the industry. On valuations, Wood argues that “the story that the DRAM industry has changed structurally, and that the companies should now be valued on a price-to-earnings basis rather than on a price-to-book basis, looks to Greed & Fear an increasingly powerful argument.” Hynix, Samsung Electronics and Micron, he notes, are trading at 7.8x, 6.8x and 9.2x consensus 12-month forward earnings respectively.

How the AI Boom Might End
Even as he increases exposure, Wood is candid about what he sees as the defining risk of the AI trade. “Greed & Fear is personally convinced that concerns about malinvestment will be the most likely trigger for an end to the AI trade, or at least for a protracted pause to refresh, given the huge amounts now being spent by the main players,” he writes.

He warns that the “main risk to the picks and shovels story remains a sudden realisation by investors that hyperscalers and the likes of OpenAI and Anthropic will not be able to generate returns on their investment,” which could abruptly curtail funding for AI capex. Circular arrangements, such as Nvidia financing OpenAI so the latter can buy more Nvidia chips, could aggravate that unwinding once capital markets begin to question long-term returns.

Portfolio Track Record and Lessons Learned
Wood also reflects on past positioning as he executes the latest reallocation. In the global portfolio, he is removing Alphabet and Alibaba to make room for SK Hynix and Kioxia, noting that Alphabet has risen 19% since its inclusion in November 2025, while Nvidia is up only 3.3% since being dropped in October 2025.

“In this sense, the trade worked. But clearly Greed & Fear would have done better to invest more in DRAM stocks,” he concedes, underlining the lesson that memory has been, and remains, the most leveraged way to play the AI theme.

Nvidia, he adds, “seems to have been used as the funding short by tech ‘pod’ platforms in recent months to bet on higher beta AI hardware plays,” further illustrating how investor focus has shifted towards component and capacity providers. That rotation is now being mirrored in his own model portfolios as he cuts India-centric positions and other non-hardware names to double down on South Korean chip giants at the heart of the AI capex cycle.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own and do not represent the views of The Economic Times)