National Stock Exchange of India Ltd. (NSE), the operator of the world’s largest derivatives exchange by trading volume, has received a ‘sell’ recommendation just as it gears up to launch the country’s biggest initial public offering.
Dolat Capital Market Pvt., a local brokerage house, initiated coverage on India’s largest stock exchange with a bearish call saying tighter regulations on the country’s equity derivatives market would crimp trading volumes and lead to a decline in its market share. As such, the rich valuations that the stock currently commands leaves little room for upside, it added.
Analyst recommendations on unlisted companies are uncommon in India and globally, making the call stand out ahead of listing of its shares on rival bourse. Indian rules don’t allow self-listing. Dolat Capital set a target price of ₹1,550, which is a 26% discount to its current price of ₹2,085 in the private trading market.
Analysts led by Punit Bahlani wrote that the impact of the decline in proprietary trading volumes and the loss of market share in index options would limit the exchange’s profit and growth rates. While the brokerage said it doesn’t dispute NSE’s long-term structural growth story, it believes current valuations fail to reflect the regulatory headwinds.
Shares of NSE are down 3% over the previous 12 months, according to unlisted share-trading platform unlistedzone.com. The stock exchange currently commands a market value of 5.2 trillion rupees.
India F&O rules
India’s F&O market has undergone sweeping regulatory changes over the past two years to check excessive speculation in derivatives. These includes increased contract sizes and restricting options contracts that settle weekly to one benchmark index per exchange.
The report highlights that NSE’s valuations in the unlisted market are higher than global peers even as its profit growth lags.
Dolat is forecasting NSE’s options trading turnover to decline at an annualised rate of about 4% between fiscal 2026 and 2029 as tighter regulations, lower retail participation and a weaker market cycle weigh on activity. In the same note, the brokerage also initiated coverage on listed peers BSE Ltd. and Multi Commodity Exchange of India Ltd. with sell ratings.
NSE IPO
The report comes weeks after the NSE filed for an estimated $3 billion IPO and targets a September listing, subject to approval from the Securities and Exchange Board of India.
Unlike most unlisted companies, NSE is extensively followed by analysts because its disclosure standards and quarterly financial reporting are broadly comparable with listed peers. The exchange also conducts earnings calls and its shares are actively traded in India’s unlisted market, where price movements and transfer data are disclosed periodically.
