At the centre of this sits the National Stock Exchange.
NSE is an unusual financial business. It does not have a conventional lending book or the credit exposure associated with traditional financial intermediation. It is not working-capital intensive and operates with very high margins. More importantly, it has something that is extremely difficult for another exchange to replicate: liquidity at scale.
But the NSE IPO also comes at an interesting point for the industry.
NSE remains overwhelmingly dominant, yet its growth has slowed, derivatives have become the biggest driver of its earnings, regulation has changed the structure of the market and BSE has gained significant share in options.
The key questions for investors are relatively simple: how durable is NSE’s moat, how much can it still grow, and what does BSE’s faster growth mean for the valuation?
The business behind the trade
When an investor places an order through a broker, NSE is part of the infrastructure underneath that transaction.
The exchange provides order matching and price discovery. NSE Clearing handles clearing and settlement, while NSE also provides indices, market data, connectivity and other market infrastructure.
The economics of this model are what make exchanges particularly attractive businesses.
Once the core infrastructure is built, processing additional trading activity does not require costs to rise in proportion to revenue. That creates operating leverage.
NSE generated ₹16,601 crore of revenue and ₹12,657 crore of adjusted EBITDA in FY26, giving it a 76% adjusted EBITDA margin. PAT was ₹10,302 crore, a margin of roughly 62%. That is an exceptionally high level of profitability.
The business is also relatively asset-light, with virtually zero debt on the FY26 numbers and limited structural working-capital requirements.
The important caveat is that operating leverage works both ways. Higher volumes can translate into very high incremental profitability, but weaker volumes can also hit earnings disproportionately.
The financialisation opportunity
The long-term opportunity starts with the savings pool.
Unique registered investors on NSE increased from 9.2 crore in FY24 to 12.9 crore in FY26, growing at a 19% CAGR.
Mutual fund AUM relative to scheduled commercial bank deposits increased from around 19.7% in 2020 to around 31.2% in 2026, based on calculations from RBI and AMFI data.
Yet equities and mutual funds together still account for only around 15%-20% of household investable assets in India, compared with roughly 50%-60% in developed markets such as the US and Canada, according to a Bain Capital report.
So India’s financialisation story still has plenty of room to play out.
For NSE, this matters because it does not need to capture household savings directly. It provides the infrastructure through which an increasing share of those savings can be invested and traded.
But the real moat is liquidity
The biggest reason NSE has become so valuable is not simply that it is the largest.
It is because liquidity creates more liquidity.
More buyers and sellers mean better liquidity and execution. Better liquidity attracts more participants, which creates even more liquidity.
Over time, this creates a powerful network effect.
This is reflected in NSE’s market share:
|
Segment |
NSE FY26 market share |
| Cash market |
93% |
| Equity futures |
99.8% |
| Equity options |
74.7% |
| Currency futures |
99.5% |
| Currency options |
100% |
NSE was also the largest multi-asset exchange globally by number of trades in cash equities and contracts traded in equity derivatives in FY26, with 11.38% of global cash-equity trades and 51.18% of global equity-derivatives contracts traded.
This is important because an exchange is not simply selling technology. It is selling access to a liquid market.
That makes its existing market share an important competitive advantage.
There is an important change in the earnings mix
NSE’s dominance does not mean its earnings profile is immune to market cycles. Transaction charges contributed more than ₹13,000 crore, or around 79% of revenue from operations, in FY26.
Within transaction revenue, options contributed around ₹10,000 crore, or roughly 60% of revenue from operations.
That makes options the biggest driver of NSE’s earnings.
It also means that changes in options trading activity, regulation and competitive market share matter much more to NSE than they would if its revenues were spread evenly across businesses.
This is becoming particularly relevant because NSE’s overall growth has moderated.
NSE FY24-FY26 CAGR
|
NSE FY24-FY26 CAGR |
|
| Revenue |
4% |
| PAT |
11% |
| Equity options ADTO |
-3.4% |
FY26 revenue declined 3% year-on-year, adjusted EBITDA declined 7% and PAT declined 15%.
The business remained highly profitable, but the numbers show that NSE’s earnings are not simply a function of its market leadership. Trading activity matters.
Regulation has changed the competitive landscape
This is one of the most important parts of the NSE story.
SEBI has introduced several measures affecting the equity-derivatives market, including higher contract sizes, changes to weekly expiries and upfront premium collection. These measures were aimed at market stability and investor protection, but they also change how traders behave and how exchanges make money.
Expiry-day structure is a particularly useful example.
BSE moved its weekly index-options expiry to Tuesday in early 2025. Its options market share subsequently increased, with the initial improvement following the expiry-day change. Under the subsequent SEBI framework, exchanges were restricted to Tuesday or Thursday weekly expiries, with one weekly benchmark index-options contract per exchange.
By Q4FY26, the competitive shift was much larger:
NSE options market share: 87.4% in FY25 to around 73%
BSE options market share: 12.6% in FY25 to around 27%
That represents a roughly 1,440-basis-point shift across the exchanges.
But this does not mean NSE has lost its dominant position. It does show, however, that changes in market structure can influence where liquidity and trading activity are concentrated.
When market rules change, trading behaviour can change with them, and liquidity can move between venues. For NSE, that is particularly relevant because options account for such a large share of its revenue.
The regulatory impact is still evolving
This may be even more important looking forward.
Some regulatory changes have already had an observable impact, but others are still too new for the market to know what the eventual steady state will look like.
The Closing Auction Session, or CAS, introduced in August 2026, is a good example. The transition has created uncertainty around expiry-day activity.
According to a recent Jefferies report, August industry index-options premium ADTO fell 20% month-on-month to ₹53,900 crore, while equity-options contracts declined 30%. Jefferies linked the weakness to uncertainty around CAS and its effect on expiry-day trading.
The important point is not that CAS will permanently reduce options activity. SEBI is already considering changes to the CAS framework, with a consultation paper out.
For investors, however, the regulatory issue remains largely forward-looking. The market is still working out how traders, brokers, proprietary firms and other participants will adapt.
The same principle applies to the new RBI framework around bank guarantees and proprietary trading. Existing guarantees under the previous framework can continue until expiry, meaning the eventual impact on funding and trading activity is still developing.
None of these changes, individually, defines the NSE investment case.
Together, they highlight something important: the rules governing NSE’s largest revenue pool are changing, and the market is still finding the new steady state.
This is where BSE matters
BSE is much smaller than NSE.
But its growth has been dramatically faster.
|
NSE |
BSE |
|
| Revenue CAGR |
4% |
88% |
| PAT CAGR |
11% |
80% |
| Options ADTO CAGR |
-3.4% |
202.5% |
That said, the scale difference remains significant.
In FY26:
|
NSE |
BSE |
|
| Revenue |
16,601 Cr |
4,834 Cr |
| EBITDA |
12,657 Cr |
3,156 Cr |
| EBITDA margin |
76% |
65% |
| PAT |
10,302 Cr |
2,497 Cr |
| Options market share |
73% |
27% |
NSE remains the much larger and more profitable exchange.
But BSE’s growth matters because it has demonstrated that it can attract meaningful trading activity and gain share in a market where NSE historically had an overwhelming advantage.
That makes BSE relevant to the NSE valuation discussion even if NSE remains the clear market leader.
Market share is only part of the story
The more interesting comparison is how much revenue each exchange generates from that activity.
Based on the FY26 numbers, NSE’s options yield — options premium turnover to notional turnover — was around 22 basis points versus around 10 basis points for BSE.
That means NSE currently monetises options activity much more effectively, generating more revenue per rupee of trading activity.
This is important because the value of an exchange comes not just from having volume, but from having deep liquidity that can be monetised.
BSE’s faster growth does not mean it has caught up with NSE’s economics.
The question for BSE is whether it can keep building liquidity and earn more from those volumes.
For NSE, the corresponding question is whether its deeper liquidity ecosystem continues to support higher monetisation even as competitors gain some share.
So what is the market pricing in for BSE compared with NSE?
This is where the valuation comparison becomes interesting.
At ₹1,785 per share, NSE is valued at around 42.9x trailing FY26 P/E.
BSE is at around 53x FY26 P/E.
Yet NSE has roughly 3.3x BSE’s market capitalisation and around 4.1x its FY26 PAT.
The difference is growth.
BSE is being valued against a much faster recent growth trajectory.
NSE, meanwhile, is being valued as an established market infrastructure franchise with enormous scale, very high margins and a substantial liquidity moat.
The comparison is therefore not simply about which exchange is bigger. That is obvious.
It is about how much investors should pay for NSE’s established dominance versus the growth potential reflected in BSE’s valuation.
But there is another layer to the comparison.
NSE also has a somewhat broader revenue base.
For every ₹100 of NSE revenue from operations in FY26, approximately:
₹79 came from transaction charges
₹7 from data connectivity
₹6 from other operating revenue
₹3 from data feed and terminal services
₹2 from clearing and settlement
₹2 from listing services
₹1 from licensing
BSE is more concentrated, with around 82% of revenue coming from transaction charges and around 70% of revenue from derivatives activity alone.
That gives NSE additional businesses around its core exchange franchise, while BSE’s opportunity is more closely tied to scaling transaction-led revenues and newer businesses such as mutual fund distribution and new index products.
NSE, meanwhile, is looking at areas including commodities, electricity futures and expanding its GIFT City international exchange business.
What investors need to watch
For NSE, the key monitorables are less about the business itself and more about the market and regulatory environment.
Options: Does NSE stabilise its options market share and trading activity?
Regulation: Where does the derivatives market settle after the latest changes, particularly CAS and the evolving funding framework?
Liquidity: Can NSE continue to maintain its liquidity advantage and higher monetisation per unit of options activity?
Financialisation: Does the expansion of India’s investor base translate into sustained growth in capital-market participation?
Diversification: Can non-transaction businesses become a larger part of the revenue mix?
The NSE IPO
Dates: September 17-21, 2026
Price band: ₹1,700-1,785
Issue size: Up to ₹22,569 crore
Offer: Full OFS
Market capitalisation at upper price band: Around ₹4.42 lakh crore
The IPO is entirely an offer for sale, with existing shareholders selling shares; NSE itself will not receive proceeds from the issue.
NSE brings together several characteristics that are rarely found in one financial business: dominant market share, deep liquidity, high operating leverage, limited balance-sheet intensity and exceptional profitability.
The long-term financialisation of India provides another structural tailwind.
But the market has changed around NSE.
Derivatives have become the biggest earnings and growth drivers for exchanges. Regulation has altered expiry structures and trading behaviour. BSE has gained meaningful options market share, becoming a more relevant competitor in NSE’s most important revenue-generating business. Newer measures, including CAS and changes affecting trading-firm funding, are still being absorbed by market participants.
None of that takes away from NSE’s franchise.
It simply means investors need to distinguish between the strength of the existing moat and the growth rate of the business going forward.
NSE is the established market leader.
BSE is a smaller exchange growing at a much faster rate and becoming more relevant in derivatives.
And for an investor entering through the IPO, the important question is ultimately not whether NSE has a strong business. It clearly does.
The question is how much of that strength, future financialisation and market leadership is already reflected in the valuation, and how the competitive and regulatory landscape evolves from here.
