National Stock Exchange of India (NSE) shares will be in focus on Thursday after brokerage firm Nuvama Institutional Equities initiated coverage on the stock with a bullish view, citing its dominant market position, strong liquidity advantages and scope for valuation re-rating.
Nuvama has assigned ‘Buy' rating to NSE shares with a target price of Rs 2,220 apiece, implying an upside potential of around 14% from Wednesday's closing price. The brokerage values NSE at 40 times its estimated September 2028 earnings per share (EPS), believing the exchange deserves valuation parity with BSE.
The brokerage expects NSE to deliver revenue and earnings per share compound annual growth rates (CAGRs) of 11% each over FY26-FY29. It also estimates EBITDA margins to remain near 78%, supported by its dominant franchise and superior operating economics.
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Why Is Nuvama Bullish On NSE?
According to Nuvama, NSE's three-decade-old liquidity moat and network effects underpin its leadership in India's capital markets. The exchange commands approximately 93% of domestic cash market turnover, nearly 100% of equity futures and around 68% of equity options premium. Its clearing arm, NSE Clearing Ltd., handles approximately 90% of cash and futures and options trades.
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Nuvama believes liquidity is the biggest competitive advantage for an exchange, as deeper order books ensure tighter spreads and lower transaction costs, attracting more participants and reinforcing market leadership.
The brokerage also believes concerns around regulatory changes in the derivatives segment are largely priced into the stock. Despite regulatory interventions, including expiry rationalisation and increases in securities transaction tax (STT), NSE reported 11.9% year-on-year (YoY) revenue growth in the first half of FY27.
Growth Drivers And Valuation
Nuvama expects growth to be supported by rising participation in cash equities, co-location services, data offerings and emerging business segments. Commodities, electronic gold receipts and the mutual fund platform could provide additional growth opportunities.
It also highlighted NSE's significant technology investments, with 2,694 free rack equivalent (FRE) racks and 1,868 member co-location racks, substantially higher than BSE.
NSE shares currently trade at estimated FY27 and FY28 price-to-earnings multiples of 40.5 times and 37.1 times, respectively.
However, risks include tighter derivatives regulations, further market share gains by BSE, technology disruptions and a prolonged decline in trading activity.
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