According to a report by global brokerage Jefferies, the National Stock Exchange's (NSE) proposed initial public offering (IPO) could mark the completion of the 'troika' of listed Indian market infrastructure institutions. As reported by ANI, the country's largest exchange is well-positioned due to its dominant market share, diversified revenue streams and robust profitability. The brokerage noted that NSE is more diversified than its domestic peer BSE and enjoys over 90 per cent market share across most business segments, with the exchange having over 88 per cent share in cash market clearing through its clearing corporation (NCL). In a report released on Tuesday, Jefferies emphasized that NSE Listing Will Complete The Trioka, highlighting the exchange's unique position in India's market infrastructure landscape. With the exchange filing for its long-awaited IPO, Jefferies believes NSE is entering the market with one of the strongest business models among global exchange operators.
According to the Jefferies report, NSE has built a sizeable technology products business, which contributes around 13 per cent of revenues, while it is also expanding its presence in commodities. The exchange operates a growing technology and data business alongside its core trading platforms. As reported by ANI, NSE is more product diversified relative to BSE/MCX, with >90% share in most categories. The report added that NSE has also built a tech product suite (13% of revenues) similar to global peers, and is expanding in commodities. This diversified business model distinguishes NSE from domestic peers while making it comparable to leading global exchanges, with the brokerage noting that NSE is more diversified than its domestic peer BSE. The exchange's clearing subsidiary, NSE Clearing (NCL), also dominates the market with an estimated 88% share in cash market clearing and 91% in futures and options clearing.
The report highlighted a structural shift in India's capital markets, noting that India has become an options-driven market. According to Jefferies, the Indian equity options market recorded a 56 per cent CAGR during FY20-FY26, compared with 19 per cent CAGR in cash market turnover, with derivatives contributing nearly 70 per cent of operating revenues for Indian exchanges. By FY26, the average daily turnover of options premiums had climbed to nearly 70% of daily cash market turnover, helping derivatives contribute about 70% of operating revenues for Indian exchanges. This transition has made exchange revenues less dependent on market direction, as options activity is largely driven by volatility. Despite India recording a higher number of options contracts than the US, option premium volumes remain only about one-fifth of US levels, indicating significant headroom for growth. As reported by ANI, NSE's dominance extends across equity cash, equity futures, single-stock options, bonds, currency derivatives and several other segments.
The latest Jefferies report reveals the stark competitive landscape ahead of NSE's potential listing. NSE, BSE and MCX together account for 97% of the Indian exchange industry's revenue, with NSE alone contributing around 70%. NSE commands a 93% share in the cash segment, 75% in equity options and nearly 100% in equity futures, while BSE holds only 7% share in cash and 25% in equity options. MCX dominates non-agricultural commodity futures and options with around 99% market share. The report also points to revenue concentration, with equity options accounting for 65% of BSE's operating revenue and commodity derivatives making up 91% of MCX's revenue. The brokerage estimates that NSE accounts for nearly 70% of India's exchange revenues while commanding more than 90% market share across most trading segments, excluding index options and commodity derivatives. Shares of BSE, MCX and IEX fell up to 4% after Jefferies highlighted the NSE's competitive strengths ahead of its proposed IPO.
According to the Jefferies report, NSE maintains a strong balance sheet with healthy operating cash flows while maintaining low capital expenditure of around 3-3.5 per cent of revenues. This efficient capital management enabled the exchange to distribute 74% and 85% of earnings as dividends in FY25 and FY26, respectively. The exchange held investment assets worth around ₹288 billion in government securities and mutual funds at the end of FY26. The brokerage noted that while regulatory actions and litigation remain key overhangs, the one-off nature of recent settlement costs suggests the core operating performance of the exchange remains intact. The report stated that "Excluding regulatory expenses, NSE is one of the most profitable exchanges globally," with normalised operating EBITDA margins remaining largely stable in the 76-77 per cent range during FY24-FY26. The proposed offer for sale by PSU general insurers could also improve their solvency position through stake monetisation in the exchange.
