The National Stock Exchange of India (NSE) may be approaching a new phase of growth as more Indian households move their savings into financial markets. That is the central investment case made by global brokerages Morgan Stanley and JPMorgan, which have initiated coverage on the exchange with Overweight ratings, betting on its market dominance and the long-term expansion of India’s capital markets.
NSE shares were trading largely flat on Monday, 2 November, despite the positive brokerage calls. Morgan Stanley has set a price target of ₹2,315 per share, implying an upside of around 30% from Friday’s closing price. JPMorgan has assigned a target of ₹2,130, indicating a potential upside of nearly 20%.
Both brokerages believe NSE is well placed to benefit from rising retail participation, growing systematic investment plan (SIP) contributions and the increasing share of household savings flowing into equities. However, they also flag market-share pressures in index options and regulatory changes as risks investors should watch.
Morgan Stanley: A long runway for India’s capital markets
Morgan Stanley sees NSE as a strong play on India’s financialisation story, backed by its dominant liquidity, scalable technology and attractive operating economics. The brokerage expects revenue and normalised profit after tax to grow at a compound annual growth rate (CAGR) of around 15% between FY27 and FY29, following a relatively subdued 6% normalised PAT CAGR over FY24-FY27.
The exchange has demonstrated its ability to deliver sustained growth, with normalised profits growing at a CAGR of 19% over 14 years and 25% over the past decade, Morgan Stanley noted.
The brokerage also points to the significant headroom for India’s capital markets to expand. While India ranks first among large exchanges globally in equity derivatives contracts traded and third in cash trades, cash trading value and equity futures turnover remain low relative to the country’s GDP.
Only 3.2% of India’s working-age population trades in the NSE cash market, while just 0.7% participates in equity derivatives. Morgan Stanley believes this underpenetration offers a long-term growth opportunity, provided product adoption, taxation and regulation remain supportive.
NSE’s competitive advantage is difficult to replicate. It commands more than 90% of the cash equities market and nearly all single-stock futures and options trading. Its index options share has moderated to around 65%, but Morgan Stanley expects it to stabilise.
The exchange’s asset-light model is another attraction. Its normalised operating EBITDA margin stood at 76.2% in FY26, among the highest for major listed exchanges globally. Strong cash generation also supports shareholder payouts, with Morgan Stanley building in a payout ratio of around 60% over FY27-FY29.
JPMorgan: Market leadership and diversification support valuation
JPMorgan also sees the worst of NSE’s index options market-share losses as potentially behind it. The exchange’s premium market share in the segment declined from around 90% in November 2024 to approximately 66% in September 2026, following BSE’s entry and regulatory changes by SEBI.
However, JPMorgan believes the current market share is likely to be sustained, with the two exchanges’ notional market shares converging towards 50%.
The brokerage highlights NSE’s integrated business model, which spans trading, clearing, settlement, index services, colocation and market data. This provides multiple revenue streams and reduces dependence on transaction-linked income.
Non-transaction revenue increased from 14.2% of total revenue in FY23 to 22.3% in FY26. JPMorgan expects this shar
e to rise to around 25% by FY29.
It expects EBITDA margins to recover from 75.3% in FY27 to 77.1% by FY29, while adjusted profit after tax (APAT) compounds at around 14% over FY27-FY29. Return on equity is projected to improve from 32.5% to 34.5%.
JPMorgan values NSE at 40 times its estimated core earnings for September 2028, adding the value of its stake in NSDL to arrive at its ₹2,130 target price.
What are the risks?
The bullish outlook is not without conditions. Both brokerages identify regulatory changes, weaker trading activity and market-share losses as key risks. For NSE, stabilising its position in index options will be particularly important, given that the segment contributed 52.6% of FY26 operating revenue, according to JPMorgan.
Morgan Stanley also cautions that the timing and scale of revenue diversification opportunities remain difficult to predict.
For investors, the key question is whether NSE can convert India’s growing retail participation into sustained earnings growth while defending its dominant franchise. The brokerages believe the long-term opportunity remains compelling, but execution and regulatory developments will determine how much of that potential translates into shareholder returns.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
