Global brokerage firm Macquarie has initiated coverage on the National Stock Exchange of India Ltd (NSE) with an 'Outperform' rating, setting a target price of Rs 1,965. This target suggests a potential 10% upside from NSE's initial public offer (IPO) issue price of Rs 1,785 per share.
Macquarie has dubbed NSE "The Dominator" in the Indian financial market, citing its unparalleled market share and extensive market power. The brokerage highlighted NSE's comprehensive suite of services, advanced technology stack, and deep liquidity as critical factors solidifying its position as a cornerstone of India's financialization.
Why Macquarie Sees Strong Potential for NSE
The 'Outperform' rating is underpinned by several key factors:
- Entrenched Network Effects: NSE benefits from strong network effects, where its value increases with the number of participants.
- Industry-Leading Profitability: The exchange demonstrates superior profitability compared to its peers.
- Robust Cash Position: A strong cash reserve further supports its positive outlook.
Macquarie believes that NSE has significant room for further re-rating, particularly if new product offerings gain momentum. Platform expansion is also expected to be a key driver for future revenue growth.
Growth Projections and Valuation
The foreign brokerage projects an annualised revenue growth of 12% for NSE between FY26 and FY30, aligning with broader market trends. This growth is anticipated to be fueled by non-transaction revenues and the successful launch of new products, partially offsetting modest share losses in cash equities and futures & options (F&O) segments.
NSE is currently valued at 22 times its estimated FY29 EV/Ebitda and 29.5 times its estimated FY29 PE. Macquarie argues that these multiples are justified by NSE's prominent position in the financial ecosystem and its superior fundamentals. While NSE trades at a 65% P/E premium to international exchanges, it also delivers 60% higher growth and returns, supported by India's structural financialization tailwinds.
"At our target price of Rs 1,965, NSE would trade at a 2.5 times PEG, broadly in line with global peers, suggesting the premium is justified on a growth-adjusted basis," Macquarie stated.
Near-Term Considerations and Expert Insights
Macquarie noted that the recently introduced Closing Auction Session (CAS) appears to be impacting trading activity as investors adapt to the new framework. Consequently, the brokerage anticipates near-term pressure on cash equity, derivatives, and MTF (Margin Trading Facility) volumes.
Separately, Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, suggested that NSE shares could list at a premium of Rs 50 to Rs 80, depending on market conditions. Sheth also advised long-term investors to consider staggered buying and not to sell shares solely for listing gains, anticipating steady institutional demand from mutual funds, insurance companies, pension funds, and overseas investors in the coming months.