NSE shares hit fresh highs, rise over 2%; Nuvama sees 14% upside, calls the stock exchange a ‘compelling buy’

Shares of the National Stock Exchange of India (NSE) rose over 2% on Thursday, 12 November, touching a fresh all-time high of ₹1,994.50. The stock had previously recorded a 52-week high of ₹1,965 on 11 November, extending its recent upward momentum.

The rally comes as Nuvama Institutional Equities initiated coverage on NSE with a bullish outlook, describing the exchange as a ‘compelling buy’ and setting a target price of ₹2,220. This implies an upside potential of around 14% from the brokerage's reference price.

In its initiation report, Nuvama said NSE's entrenched liquidity advantage and strong network effects underpin its dominant position in India's capital markets. The brokerage believes the exchange's competitive moat, improving market participation and potential growth from emerging business segments could support its earnings trajectory.

Nuvama said NSE's three-decade-long presence has created a strong liquidity moat that continues to reinforce its market leadership. The exchange commanded around 93% of the cash market, nearly 100% of equity futures and approximately 68% of options premium turnover value (PTV) as of H1 FY27.

According to the brokerage, this market depth makes NSE the preferred trading venue for brokers, foreign portfolio investors (FPIs), market makers and algorithmic traders. Its cash market share has remained around 93% through FY20–FY26, even after the introduction of market interoperability in 2019, while its equity futures market share is close to 100%.

Nuvama noted that NSE's options franchise is also more diversified than that of its rival BSE. The exchange held around 68% of index options premium as of Q2 FY27, while BSE's gains in the segment remain more concentrated around its own expiry day.

The brokerage believes several regulatory challenges facing the derivatives business have already been factored into the market outlook. These include expiry rationalisation measures, two increases in securities transaction tax (STT), the core Settlement Guarantee Fund (SGF) top-up and the SEBI settlement.

Nuvama pointed out that index options account for around 46% of NSE's revenue, compared with approximately 66% for BSE. It also highlighted that clients trading less than ₹10 lakh in premium per month contribute only 2–3% of NSE's options premium.

The brokerage said NSE's premium and contract quality remain superior to those of BSE. It added that revenue grew 11.9% year-on-year in H1 FY27, indicating resilience despite regulatory changes.

Nuvama also highlighted NSE's significant investments in technology and co-location infrastructure, which it believes further strengthen the exchange's competitive position.

NSE has 2,694 free rack equivalent (FRE) racks and 1,868 member co-location racks, compared with 500 co-location racks at BSE.

Technology spending is also higher at NSE. The brokerage estimates that technology expenses will account for 7.9% of NSE's revenue in FY26 and 5.7% in FY27, against 4.2% and 4%, respectively, for BSE.

Nuvama expects NSE to deliver revenue and earnings per share (EPS) compound annual growth rates (CAGRs) of 11% each over FY26–FY29. Growth is expected to be supported by cash equities, rising market free float, co-location services, data-related businesses and a stable share in the options segment.

The brokerage expects NSE to maintain an EBITDA margin of around 77.9% over the forecast period.

It also believes the potential contribution from commodities, electronic gold receipts and the mutual fund platform is not fully reflected in current expectations, offering additional growth opportunities.

Nuvama values NSE at 40 times its estimated September 2028 earnings per share, arriving at a target price of ₹2,220. The brokerage said this valuation multiple is justified given NSE's market leadership, strong return ratios and cash-generating business model.

At the time of the report, NSE was trading at 40.5 times and 37.1 times its estimated FY27 and FY28 earnings, respectively. The exchange also reported a return on equity of 34.4% in FY26 and offered an estimated dividend yield of around 1.6%.

Nuvama believes the valuation gap between NSE and BSE is unjustified despite NSE's stronger market position. It expects the discount to narrow, with NSE's valuation moving towards parity with BSE.

However, the brokerage flagged risks including tighter derivatives regulations, further changes to expiry schedules or lot sizes, higher STT, faster market-share gains by BSE, technology or cybersecurity disruptions, and a prolonged slowdown in market activity.

Dhanya Nagasundaram works as a Content Producer at LiveMint, specializing in news related to financial markets, stocks, and business. With over eight years of experience in journalism and content creation, she has honed her skills in data-driven reporting and market analysis. Her focus is on monitoring stock trends, initial public offerings (IPOs), corporate news, policy shifts, and larger economic trends that affect investors and market players. <br><br> At LiveMint, Dhanya consistently writes and produces articles that make complex financial topics accessible to readers. She keeps a close eye on equity markets, commodities, and macroeconomic indicators, assisting audiences in comprehending how global and domestic events influence investment perspectives. Her stories frequently underscore emerging trends within sectors, the IPO market, company earnings results, and market strategies pertinent to both retail and institutional investors. <br><br> Before her tenure at LiveMint, Dhanya accumulated a wealth of professional experience at various companies, including MintGenie, Informist, Cogenics, Chary Publications, KPMG, and the Royal Bank of Scotland. These positions allowed her to establish a solid foundation in financial research, reporting, and content creation. <br><br> Throughout her career, she has explored numerous subjects such as trading strategies, commodities, IPOs, wealth generation, corporate profits, and macroeconomic indicators. Her background in both financial journalism and corporate settings has given her the ability to tackle stories with analytical rigor while ensuring clarity for her audience. Through her contributions, Dhanya strives to deliver insightful, trustworthy, and investor-centric financial content.

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HomeMarketsStock MarketsNSE shares hit fresh highs, rise over 2%; Nuvama sees 14% upside, calls the stock exchange a ‘compelling buy’

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