NYSE moves fast to take strategic stake in Mumbai stock exchange

The battle for supremacy among the world's biggest stock markets opened up along a new front yesterday, as the New York Stock Exchange snapped up a stake in India's busiest market.

The NYSE teamed up with a consortium of financial bidders, including the mighty Goldman Sachs, to get a "first strategic foothold" in the country, just three weeks after the Indian government opened up its stock markets to foreign investment.

The acquisition of a stake in the National Stock Exchange (NSE) comes as the NYSE's arch-rival, Nasdaq, and the London Stock Exchange examine a similar investment in the cross-town rival, the Bombay Stock Exchange (BSE).

The NSE, an all-electronic trading business headquartered in Mumbai but with offices in five other cities, sold a 20 per cent stake, divided equally among the NYSE, Goldman and two private-equity groups, General Atlantic of the US and Japan's Softbank.

The consortium is hoping to cash in on the growth of the Indian economy, forecast to top China as the world's fastest expanding economy this year. The NYSE in particular believes that the association will help it attract major Indian companies to list in New York, while the NSE gains access to some of the US exchange's technological expertise.

Ravi Narain, the NYSE's chief financial officer, said that the 5 per cent stake - for which it is paying $115m (£60m) - does not at this stage confer any control over the NSE or generate any cost savings. "In markets like India, as well as probably China, you need to make bets and have a longer time horizon," he said. "It was important to get in the first strategic foothold with the partner of choice."

The business was founded as a mutual by several of India's top banks in 1992, after the liberalisation of the country's securities markets. It has grown to trade an average $9bn (£4.7bn) of equities and derivatives every day, more than twice that of its nearest rival, the BSE.

Mr Narain said that the deal meant NYSE was no longer interested in taking a stake in the Bombay exchange, the largest Indian market by the value of its listed companies, and the oldest exchange in Asia. The NSE's derivatives business made it more attractive, he said.

The London Stock Exchange is among a clutch of international exchangesexamining the possibility of taking a stake in the BSE. Nasdaq, which has made a hostile bid for the London Stock Exchange, is also on the list of bidders touted by the BSE, although Deutsche Börse and the Singapore Stock Exchange are seen as more likely front runners.

The NYSE's acquisition yesterday marks another significant strategic move by John Thain, the former Goldman Sachs banker who became chief executive two years ago and last month won backing for the takeover of Euronext, the European equity and futures exchange. He had previously signalled his interest in a deal with an Asian exchange as the NYSE positions itself for round-the-clock trading by owning exchanges in interlocking time zones.