Nuvama Institutional Equities has initiated 'Buy' coverage on the National Stock Exchange of India Ltd (NSE), projecting a 12-month target price of Rs 2,220. The brokerage firm cites NSE's dominant market position and an unjustified valuation discount when compared to BSE Ltd as key drivers for its optimistic outlook.
According to Nuvama, three decades of entrenched liquidity and robust network effects underpin NSE's leading franchise and superior unit economics. The report emphasizes NSE's commanding market share, which stands at approximately 93 percent in cash, nearly 100 percent in equity futures, and around 68 percent in options premium turnover (PTV) as of H1 FY27.
Why NSE's Valuation Discount is Unjustified
Despite its broader market leadership, NSE currently trades at a discount to BSE. Nuvama believes this disparity is unwarranted and warrants a re-rating to achieve valuation parity. The brokerage values NSE at 40 times its estimated EPS for September 2028.
Nuvama expects NSE to achieve an impressive 11 percent revenue CAGR between FY26 and FY29. Potential upsides are identified from a recovery in market participation, spikes in volatility, and growth in emerging segments. Importantly, the firm notes that most regulatory headwinds are now behind India's largest exchange.
Competitive Edge and Regulatory Landscape
NSE's competitive positioning is bolstered by its exceptional execution quality and market depth, making it the preferred trading venue for brokers, foreign portfolio investors (FPIs), market makers, and algorithmic traders. Its cash market share has consistently remained around 93 percent from FY20 to FY26, even after the introduction of clearing interoperability in 2019. In the equity futures segment, its market share is nearly 100 percent.
In the options market, NSE maintains approximately 68 percent of index-option premium turnover as of Q2 FY27. Nuvama highlights that while BSE has seen gains in this segment, they are largely concentrated on its own expiry day, whereas NSE's options franchise is more broad-based.
Concerns surrounding options-related regulatory changes are deemed overstated, with Nuvama asserting that much of the regulatory reset is already factored into its estimates. Index options contribute around 46 percent of NSE's revenue, compared to approximately 66 percent for BSE. Clients trading less than Rs 10 lakh in premium per month contribute a mere 2-3 percent of NSE's total premium.
Furthermore, significant regulatory shifts such as expiry rationalization, two STT hikes, the core SGF top-up, and the Sebi settlement are now in the past for the exchange. NSE's revenue grew by 11.9 percent year-on-year (YoY) in H1 FY27, with Nuvama emphasizing the superior premium and contract quality of NSE compared to BSE.
Technological Infrastructure and Other Brokerage Views
NSE boasts robust technology infrastructure, including 2,694 FRE racks and 1,868 member co-location racks, significantly outnumbering BSE's 500 co-location racks. NSE's technology spending is estimated at 7.9 percent of revenue in FY26 and 5.7 percent in FY27E, compared to 4.2 percent and 4 percent, respectively, for BSE.
In a similar move, Motilal Oswal Financial Services Ltd (MOFSL) has also initiated 'Buy' coverage on NSE, setting a one-year target price of Rs 2,300, further reinforcing the positive sentiment surrounding the exchange's prospects.