NSE shares: Brokerage initiates coverage with 'Buy'; highlights valuation discount to BSE

Nuvama Institutional Equities has initiated coverage on National Stock Exchange of India Ltd (NSE) with a 'Buy' rating, citing its dominant market position and valuation discount to BSE Ltd.

The domestic brokerage said three decades of entrenched liquidity and network effects underpin NSE's dominant franchise and superior unit economics. It highlighted NSE's market share of around 93 per cent in cash, nearly 100 per cent in equity futures and around 68 per cent in options premium turnover (PTV) as of H1 FY27.

Nuvama expects NSE to report an around 11 per cent revenue CAGR over FY26-FY29. It sees potential upside from a recovery in market participation, volatility spikes and emerging segments, while regulatory headwinds are largely behind India's largest exchange.

"Despite NSE's broader market leadership, it trades at a discount to BSE. We believe this discount is unjustified and warrants re-rating towards parity," Nuvama noted.

The brokerage values NSE at 40x its September 2028 estimated EPS, arriving at a 12-month target price of Rs 2,220. The stock trades at FY27 and FY28 estimated P/E of 40.5x and 37.1x, respectively.

On NSE's competitive positioning, Nuvama said its execution quality and market depth make it the default trading venue for brokers, foreign portfolio investors (FPIs), market makers and algorithmic traders. Its cash market share has remained around 93 per cent through FY20-FY26, even after the introduction of clearing interoperability in 2019, while its equity futures market share is close to 100 per cent.

In the options segment, NSE continues to hold around 68 per cent of index-option premium turnover as of Q2 FY27. Nuvama highlighted that BSE's gains in the segment are concentrated on its own expiry day, while NSE's options franchise is more broad-based.

The brokerage also said concerns around options-related regulatory changes are overstated, with much of the regulatory reset already reflected in its estimates. Index options account for around 46 per cent of NSE's revenue, compared with approximately 66 per cent for BSE. Clients trading less than Rs 10 lakh in premium per month contribute only 2-3 per cent of NSE's premium.

Expiry rationalisation, two STT hikes, the core SGF top-up and the Sebi settlement are also behind the exchange, Nuvama said. NSE's revenue grew 11.9 per cent year-on-year (YoY) in H1 FY27. The brokerage added that NSE's premium and contract quality are significantly superior to BSE's.

On technology infrastructure, Nuvama highlighted NSE's 2,694 FRE racks and 1,868 member co-location racks, compared with 500 co-location racks at BSE. NSE's technology spending is estimated at 7.9 per cent of revenue in FY26 and 5.7 per cent in FY27E, against 4.2 per cent and 4 per cent, respectively, for BSE.

Meanwhile, Motilal Oswal Financial Services Ltd (MOFSL) has also initiated coverage on NSE with a 'Buy' rating and a one-year target price of Rs 2,300.