The National Stock Exchange (NSE) is among the fastest-growing and profitable exchanges in the country, says Nuvama Institutional Equities in its India Equity Research report. The exchange has seen strong growth in equity index options, outperforming global peers.
NSE’s active client base expanded at a CAGR of 55.7 per cent in FY20–24 and stood at 49.6 million at the end of November 2024.
Despite a substantial rise in regulatory charges, strong operating leverage drove NSE’s EBITDA margin higher from 62.8 per cent in FY20 to 71.5 per cent in FY24. NSE delivered an FY20–24 APAT CAGR of 46.9 per cent and FY24 RoE of 38.5 per cent.
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“With a market share of 93 per cent in cash equities, 99 per cent in equity index futures and 88 per cent in equity index options premium, NSE has a hard-to-catch-up lead,” the report read.
The report noted that SEBI introduced measures to limit trading in weekly contracts by restricting exchanges to one weekly expiry contract, significantly increasing lot sizes, raising margin requirements on expiry day, and increasing surveillance measures. This could lead to a short-term decline in option transaction revenue as trading volumes may get affected, according to Nuvama. It is reckoned that discontinued contracts on NSE/BSE contributed to 47 per cent /21 per cent of equity index option premium turnover FY25TD.
While SEBI’s norms aimed at safeguarding retail investors shall cause near-term volatility in revenue, they would make markets healthier longer-term. NSE has settled three major cases FY25TD, addressing regulatory overhang, the report added.
Nuvama observed three key trends: dark pools capturing equity volume growth; use of maker-taker model to create liquidity; and cloud transition.
NSE maintained a dominant 88 per cent market share in options trading, down from 100 per cent in May 2023 when BSE launched two derivative products viz. Bankex and Sensex.
The exchange has been litigating with regulators on colocation, dark fibre and trading access point, and has settled three major litigation cases in FY25TD.
