The National Stock Exchange of India, the country's dominant stock exchange operator, faced its first major test as a listed company on Thursday, October 22, as about 18.9 million of its shares became eligible for trading following the expiry of a one-month IPO lock-in.
The shares, which represent about 1% of NSE's outstanding equity, were worth roughly ₹3,225 crore at Wednesday's closing price, according to Kotak Neo. The value is notional: it reflects the shares that can now be sold, not the amount that will necessarily be sold.
The unlock comes at an awkward moment. NSE closed at ₹1,706.55 on Wednesday, October 21, down 1.1% for the day and ₹78.45 below its IPO price of ₹1,785. In early trade on Thursday, the shares fell a further 1.14% to ₹1,687.10.
A muted listing
NSE's IPO was one of the most anticipated offerings in Indian market history. After years of regulatory delays, the exchange operator opened its offer in September, and the three-day issue was subscribed 5.71 times, with strong demand from institutional investors and a fully subscribed retail portion.
The shares listed on the BSE on September 24 at ₹1,800, a premium of just 0.8% to the issue price. NSE cannot list on its own platform, so it trades on the rival exchange. The stock rose further in its first session, taking the company's market capitalisation to about ₹4.65 lakh crore, but has drifted lower since.
That performance stands in contrast to the enthusiasm that had built around NSE shares before the IPO, when they were among the most actively traded stocks in India's unlisted market.
Why lock-in expiries matter
Under Indian rules, certain shareholders in an IPO are restricted from selling their shares for a specified period after listing. Anchor investors, for example, face lock-ins on a portion of their shares for 30 days, and on the rest for 90 days. Pre-IPO shareholders may face longer restrictions.
When these lock-ins expire, the number of shares available for trading increases, and markets often worry that investors who received allocations or held shares before the IPO will sell. That can put pressure on the share price, especially when the stock is trading below or near the issue price and investors have little incentive to hold on.
However, lock-in expiries do not always lead to heavy selling. Long-term investors may choose to hold, and the impact depends on market conditions and the investors' views on the company's prospects.
The business behind the stock
NSE is one of the world's largest exchanges by number of trades, driven largely by India's enormous equity derivatives market. It earns revenue from transaction fees, listing fees, data services, colocation and clearing. Its dominance in futures and options trading has made it highly profitable.
That dominance is also a source of risk. The Securities and Exchange Board of India has introduced a series of measures since 2024 to curb speculative trading in index derivatives, citing data showing that the vast majority of individual traders lose money. Measures such as larger contract sizes, fewer weekly expiries and higher margin requirements have reduced trading volumes, affecting NSE's transaction revenue.
Investors are weighing whether further regulatory action could slow growth, and how NSE will fare as competition from BSE intensifies. BSE has gained market share in options trading in recent years, and its shares have been among the best-performing financial stocks in India.
