- The Business Behind Your Broker App
- India's Growing Market Gives NSE a Larger Playing Field
- The Strength and Weakness Come From the Same Place
- Options Are Both a Growth Engine and a Regulatory Risk
- Scale Creates an Advantage, but It Does Not Remove Operational Risk
- What Are Investors Paying for NSE?
- Author's Take
The National Stock Exchange of India (NSE) IPO is coming to the public market at a time when Indian investors are participating in equities more than ever. The IPO is open from September 17 to September 21, 2026, with a price band of ₹1,700 to ₹1,785 per share. But the more interesting question is not simply how much demand the IPO attracts. It is what investors are actually buying at this price.
NSE sits at the centre of India's stock market. It has a dominant position in cash equities and equity futures, a huge investor base and a business model capable of producing very high margins. At the same time, most of its revenue still depends on trading activity, particularly options, where regulatory changes have already affected volumes and market share.
That creates an unusual investment story: a remarkably strong market position, but one whose future growth is partly dependent on how much trading the regulator allows.
The Business Behind Your Broker App
When an investor buys a share through Zerodha, Groww, INDmoney or another broker, the app is only the front end. The actual transaction happens through the exchange.
A buy order is routed to NSE, where its trading system matches it with a corresponding sell order. NSE’s subsidiary, NSE Clearing Limited, then handles the clearing and settlement process, helping ensure that the buyer receives the shares and the seller receives the money.
This matters because NSE is not competing to win every individual investor directly. Its value comes from being the marketplace where investors, brokers, and institutions come together.
That creates a powerful network effect. The more buyers and sellers use an exchange, the more liquidity it has. Better liquidity generally makes it easier to execute trades, which can attract still more participants.
NSE has built an enormous network around this model. As of June 30, 2026, it had 132.37 million unique registered investors, 3,005 listed companies and 1,328 trading members. In FY26, it held 92.99% of India's cash-equity market and 99.79% of equity futures.
For an exchange, that scale is not just a vanity metric. It can reinforce the business itself because traders tend to prefer the marketplace where the most activity is already taking place.
India's Growing Market Gives NSE a Larger Playing Field
The long-term opportunity is supported by a broader change in how Indians are investing their savings.
The share of household net financial assets allocated to equities and mutual funds increased from 5.41% in FY21 to 26.89% in FY25. The number of unique investors has also climbed sharply, reaching 132.37 million.
The wider capital market is expected to expand as more Indians participate in investing. Cash-market trading, where investors buy or sell actual shares such as Reliance or TCS, is projected to grow from ₹280.26 trillion in FY26 to ₹473-507 trillion by FY30. Equity futures, where investors agree to buy or sell a share or market index at a future date and price, are expected to rise from ₹394.67 trillion to ₹715-765 trillion over the same period.
If more Indian savings move into financial assets and trading activity expands, NSE is starting from an unusually strong position to capture that growth.
But there is an important distinction here: a growing market does not automatically mean NSE's revenue will grow at the same rate.
The reason is visible in the company's revenue mix.
The Strength and Weakness Come From the Same Place
NSE generated ₹16,601.31 crore of operating revenue in FY26, and 78.65% of it came from transaction fees.
That makes the exchange highly sensitive to trading activity. When investors trade more, NSE can earn more without having to build an entirely new physical network for every additional transaction. This is why the business can generate exceptional operating margins.
Its operating EBITDA margin was 66.85% in FY26. In simple words, after operating expenses, a large portion of each additional rupee of revenue can flow through to operating profit.
The same economics, however, work in reverse.
If trading volumes slow, revenue can fall while much of the underlying technology and infrastructure cost remains. That makes transaction-dependent revenue less predictable than a business based largely on recurring subscriptions or long-term contracts.
NSE's financial performance already shows this sensitivity. Operating revenue increased from ₹14,780.01 crore in FY24 to ₹17,140.68 crore in FY25, before declining to ₹16,601.31 crore in FY26 as equity-derivatives trading volumes moderated following regulatory changes.
Net profit followed a similar pattern, rising from ₹8,305.74 crore in FY24 to ₹12,187.69 crore in FY25, then falling to ₹10,302.06 crore in FY26.
The FY25 profit also benefited from gains from selling stakes in associates, so it would be misleading to treat the jump in profit as entirely representative of normal operating growth.
The early FY27 numbers are more encouraging. Q1 FY27 operating revenue rose 13.1% year-on-year to ₹4,560.41 crore, while profit increased 11% to ₹3,121.88 crore, helped by stronger activity in the cash and options markets.
Options Are Both a Growth Engine and a Regulatory Risk
The biggest concentration inside NSE's transaction revenue is particularly important.
Of the ₹13,057.01 crore earned from transaction fees in FY26, ₹9,997.57 crore came from options trading. Cash-market transactions contributed ₹1,555 crore, while futures contributed ₹1,480 crore.
This explains why changes to derivatives regulation matter so much to NSE.
SEBI has tightened rules for equity derivatives, which are contracts linked to stocks or market indexes, to reduce excessive speculative trading. The changes include fewer expiry days, larger contract sizes, and higher upfront requirements. These rules have already changed the competitive landscape.
NSE's share of equity-options trading by premium value fell from 96.86% in FY24 to 74.71% in FY26 and 68.48% in Q1 FY27.
This does not necessarily mean NSE's business is weakening. It shows that one of its biggest revenue sources is increasingly exposed to regulation and competition.
The opportunity, therefore, is not simply that India's capital markets will grow. Investors also need to consider which parts of that growth NSE can monetise.
Its expansion into areas such as GIFT City, new products and a larger investor base could help. Its index business also provides another channel: 76.89% of index funds and ETFs in India track NSE's Nifty indices.
But the company's ability to diversify beyond transaction fees will matter increasingly if derivatives activity remains regulated.
Scale Creates an Advantage, but It Does Not Remove Operational Risk
NSE's dominance also creates another important advantage: scale.
In FY26, NSE generated ₹16,601.31 crore of operating revenue and ₹10,302.06 crore of profit, compared with ₹4,833.95 crore and ₹2,487.25 crore respectively for BSE. That means NSE's revenue was approximately 3.4 times BSE's, while its profit was approximately 4.1 times larger.
Yet a large technology platform comes with its own vulnerabilities.
A storage-network failure in February 2021 halted trading for five hours and 24 minutes and resulted in ₹72.65 crore of regulatory settlements. For an exchange, technology is not merely an operating tool. It is the core infrastructure investors depend on.
NSE also has customer concentration. Its top 10 trading members contributed 46.78% of operating revenue in FY26, while the largest single customer contributed 7.96%.
These risks are important precisely because NSE is so central to the market. A technical failure, regulatory action or major problem involving a key trading member could have a direct financial and reputational impact.
What Are Investors Paying for NSE?
At the upper IPO price of ₹1,785, NSE's market capitalisation is approximately ₹4.42 lakh crore. Based on FY26 earnings, the stock is being valued at roughly 43 times earnings.
That is a substantial absolute valuation. But looking only at the number can be misleading.
BSE trades at approximately 54.28 times earnings, compared with roughly 43.4 times for NSE. On price-to-sales, NSE is at 26.61 times versus 27.34 times for BSE.
So NSE is entering the market at a lower valuation multiple than its primary listed domestic peer, even though its business is much larger and its market share is substantially higher.
There is also considerable profitability behind that valuation. NSE's FY26 operating EBITDA margin was 66.85%, net profit margin was 50.98%, and return on equity was 32.98%.
The comparison is not entirely one-sided. BSE's ROE was higher at 45%. More importantly, NSE's valuation still assumes that its powerful market position will translate into substantial future earnings despite the changing regulatory environment.
That is the key issue investors need to weigh. A lower multiple than BSE provides some valuation support, but it does not make NSE immune to slower derivatives growth.
Author's Take
NSE's IPO brings together two very different characteristics. On one side is an exceptionally strong market position, supported by network effects, deep liquidity, high margins, and a huge investor base. On the other is a business where nearly four-fifths of operating revenue still comes from transaction fees, with options accounting for the largest share of that income.
At roughly 43 times FY26 earnings, investors are paying a substantial price for a business of very high quality, although the valuation is below BSE's multiple. The more important question is therefore not whether NSE has a strong franchise. The evidence clearly shows that it does. The question is how much of India's future market growth NSE can convert into earnings as derivatives regulation evolves.
The investment case ultimately rests on that trade-off: dominant market infrastructure today versus the uncertainty around how its biggest revenue engine can grow tomorrow.
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