Jefferies has initiated coverage of NSE with a Buy rating and Rs 2,085 target, arguing that its market leadership, new businesses, higher margins and dividend potential warrant a premium to BSE.
Jefferies has started coverage of the National Stock Exchange of India with a “Buy” rating and a target price of Rs 2,085 a share, a level that implies about 17% upside from current levels and marks a more constructive view than the market’s usual comparison with BSE. The brokerage said it values NSE at 35 times estimated December 2028 earnings per share, or roughly a 15% premium to its fair value for BSE, because it sees the exchange as more diversified, better placed to expand into new businesses, capable of generating higher margins and able to pay a stronger dividend.
That premium view comes despite NSE’s stock already trading on a rich multiple. According to the report cited by Business Today, the exchange changes hands at 34 times estimated FY28 earnings, which Jefferies said actually leaves it at an 18% discount to BSE on a relative basis. Jefferies argues that the gap is too wide given NSE’s position as the clear leader in cash equities, index futures and options, stock derivatives, as well as clearing and settlement.
The brokerage also expects NSE’s revenue mix to broaden over time. It said technology infrastructure revenues, which made up 8% of FY26 sales, could rise to 11% by FY29 as the company adds more colocation racks. Jefferies also pointed to newer initiatives such as commodity derivatives, the new mutual fund ordering platform and electronic gold receipts, or EGRs, as possible extra growth drivers that could add as much as 15% to revenue and profit after tax by FY30, though it said those opportunities were not included in its base case. Other areas under review include corporate bond futures, GIFT City and Market Lens.
Jefferies said it expects EBITDA margin to rise by 200 basis points to 78% by FY29, helped by earlier investment in staff and technology, stronger revenue growth and the scaling up of newer businesses. It also said the risk from regulatory action aimed at protecting small traders should be limited, because low-turnover clients account for only 2% to 3% of NSE’s activity. Over the next five years, the brokerage sees equity options falling to about 50% of transaction revenues from roughly 60% now as the exchange diversifies further.
The broader backdrop is still supportive. Jefferies noted that India has seen a fourfold increase in direct equity investors since the pandemic, led largely by younger participants, even though market penetration remains low at about 3% of the population, compared with 18% in China. It added that exchanges can also act as a hedge in volatile markets because options revenue rises with the VIX, the market’s volatility gauge, since this business is driven by premiums rather than the same model used by many global peers. Other brokerages remain positive on the stock as well, with Macquarie, PL Capital, Emkay Global and Asian Markets Securities all assigning bullish ratings and target prices above current levels.
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