Motilal Oswal highlights that NSE dominates Indian exchanges with a near-monopoly in cash equities and future trading volumes. In the cash segment, it has consistently maintained 90%+ market share for several years, which the brokerage expects it to sustain.
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PL Capital Report
Domestic brokerage firm PL Capital has initiated coverage on National Stock Exchange Ltd. with ‘Accumulate' rating and has set a target price of Rs 1,950, 35 times FY29E P/E.
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The brokerage expects valuation to sustain at these levels, supported by structural factors such as
- near-dominance in key segments with high entry barriers;
- healthy profit growth (11% CAGR over FY26- FY29E); and
- optionality from new derivative products/ colocation revenue.
According to the brokerage, NSE dominates the exchange landscape with over ~93% share in cash market and ~100% in stock and index futures (YTDFY27), supported by strong liquidity, robust technology and a comprehensive product suite. Market share in index options has declined to ~65% (YTDFY27) due to regulatory hurdles; introduction of CAS and prop trading rules has impacted volumes further.
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While revenue grew at 25% compound annual growth rate in FY21- 26, PL Capital builds a CAGR of 11% over FY26-29E due to shrinking share in index options. The brokerage expect EBITDA margin to recover to 76% by FY29E vs 71% in FY26 as one-offs get adjusted, in-line with PAT CAGR of 11%.
NSE's IPO values it at Rs 4.4 trillion, with P/E of 32x on FY29E earnings, and the brokerage believes the valuation largely captures the premium.
Key risks
- High dependence on trading activity: A significant portion of revenue is linked to trading volumes, making the business inherently cyclical. Periods of lower volatility, weaker retail participation, or subdued primary market activity is likely to impact earnings.
- Concentration risk: The top 5/10 trading members contribute to 32%/ 47% of operating revenue. Any drop in volume from these parties is likely to affect revenue.
- Regulatory overhang on derivatives segment: Measures such as CAS, restrictions on weekly expiries, and higher margin requirements have dampened retail participation and overall trading activity.
- Impact of RBI norms on leverage: Revised RBI norms (effective Jul'26) will tighten collateral requirements for broker funding and proprietary trading, increasing the cost of leverage. This could lead to moderation in prop-driven activity, impacting overall industry volumes.
- Technology infrastructure and cybersecurity risk: Any system outages, latency issues or cyberattacks could disrupt trading, damage reputation, and trigger penal.
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