NSE Q2 Results: Profit Rises 23%, But What's the Real Growth?

The National Stock Exchange of India (NSE) reported a 23% year-on-year (YoY) increase in consolidated net profit to ₹2,578 crore in Q2 FY27. Revenue from operations grew 11% to ₹4,067 crore, while operating EBITDA more than doubled, rising 107% YoY.

At first glance, these numbers suggest a strong improvement in NSE's business. However, a closer look reveals a different picture. Much of the sharp increase in operating profit came from the absence of a large one-time expense recorded last year. Meanwhile, NSE's mutual fund business is growing rapidly, but its earnings remain heavily dependent on options trading.

So, how strong were NSE's Q2 results, what actually drove its earnings, and what should investors watch going forward?

NSE Q2 FY27 Results: How Did the Exchange Perform?

NSE reported growth in both revenue and profit compared with the same quarter last year. However, the increase in reported operating profit was significantly higher than its revenue growth.

Here is a comparison of NSE's consolidated financial performance.

The most striking figure is NSE's 107% growth in operating EBITDA. EBITDA is a measure of operating earnings before interest, taxes, depreciation and amortisation.

The exchange also reported a sharp reduction in expenses, which fell 51% from ₹2,354 crore to ₹1,161 crore.

But does this mean NSE suddenly became much more efficient at running its business? Not exactly.

Why Did NSE's Operating Profit Jump 107%?

The biggest reason behind NSE's sharp operating profit growth was a large expense recorded in the previous year.

In Q2 FY26, NSE had recognised ₹1,297 crore in SEBI settlement fees. This was a one-time expense that significantly reduced its reported profit during that quarter.

Since there was no corresponding settlement expense in Q2 FY27, NSE's reported expenses were much lower, making the year-on-year profit growth appear unusually strong.

To understand the actual operating performance, it is important to look at normalised EBITDA. This removes the impact of exceptional expenses and other one-time adjustments to provide a clearer comparison.

NSE's Normalised EBITDA Tells a Different Story

After removing the impact of exceptional items, NSE's underlying operating EBITDA grew only 11% YoY, compared with the reported growth of 107%.

Interestingly, this 11% growth was broadly in line with the exchange's revenue growth during the quarter.

Its normalised EBITDA margin also remained unchanged at 76%, suggesting that NSE maintained its operating profitability rather than achieving a major improvement in efficiency.

This does not mean NSE's performance was weak. The exchange continued to generate substantial operating profits and maintained a high margin.

However, the results indicate that NSE's underlying business grew steadily, rather than doubling its operating earnings as the reported figures might suggest.

What Actually Drove NSE's Revenue Growth?

NSE earns revenue from multiple activities, including stock trading, derivatives trading, listing fees, clearing services and market data.

However, transaction charges remain its largest revenue source. These are fees collected when trades take place on the exchange.

In Q2 FY27, NSE earned ₹3,035 crore from transaction charges, an increase of 9% from ₹2,789 crore in Q2 FY26.

Transaction charges accounted for approximately 75% of NSE's total operating revenue.

This highlights an important feature of NSE's business. While the exchange operates several financial platforms, its earnings are still largely linked to trading activity.

Options Trading Remains NSE's Biggest Revenue Source

Within transaction charges, options trading was the largest contributor. NSE generated ₹2,216 crore from options trading during Q2 FY27, accounting for approximately 54% of its operating revenue.

Even more interestingly, weekly Nifty index options alone generated ₹1,699 crore. That means approximately 42% of NSE's entire operating revenue came from weekly Nifty options.

This is a significant concentration in a single product category.

Options are derivative contracts whose value depends on an underlying asset, such as the Nifty 50 index. Investors and traders use them to manage risk or take positions based on expected market movements.

For NSE, higher options trading activity generally creates opportunities to earn more transaction charges.

However, this also means changes in trading volumes, investor participation or derivatives regulations can affect its revenue.

NSE's dominance in options trading is a major business strength, but its heavy dependence on this segment also creates a risk that investors need to understand.

NSE's Mutual Fund Business Grew 155%, But How Much Does It Earn?

While options trading remains NSE's largest revenue source, its mutual fund platform delivered one of the fastest growth rates during the quarter.

The number of mutual fund orders processed through NSE increased 155% YoY in Q2 FY27.Total quarterly orders reached approximately 67.2 crore, compared with 26.4 crore in Q2 FY26.

NSE's market share in mutual fund orders also increased from 12% to 22% during the same period.

This suggests that more mutual fund transactions are being processed through NSE's platform, strengthening its position beyond traditional stock and derivatives trading.

However, there is an important difference between transaction growth and actual revenue generation.

Despite the 155% increase in orders, NSE earned only ₹13 crore in mutual fund transaction charges during the quarter, compared with ₹4 crore a year earlier.

That represents just 0.3% of NSE's total operating revenue. In comparison, weekly Nifty options alone generated ₹1,699 crore during the same period.

This shows that although the mutual fund platform is growing rapidly, its contribution to NSE's overall earnings remains relatively small.

For investors, the important question is whether continued growth in mutual fund activity can eventually translate into a meaningful revenue stream. If that happens, it could help NSE diversify its business and gradually reduce its dependence on derivatives trading.

NSE's Trading Volumes Reveal Another Interesting Trend

NSE's overall revenue growth also hides significant differences in trading activity across its major products. While cash-market trading increased, some derivatives segments recorded weaker volumes. Here is how average daily trading volumes changed in Q2 FY27 compared with the previous year.

The cash market, where investors directly buy and sell shares, recorded 24% growth in average daily traded value.

NSE's transaction revenue from cash-market trading increased even faster, rising 30% YoY to ₹474 crore.

In contrast, equity futures average daily traded value declined 12% YoY.

Equity options also showed relatively modest growth. Their average daily premium value increased just 3%, while the notional value of options traded declined 14%.

Notional value refers to the total underlying value represented by derivative contracts, while premium value represents the amount paid for options contracts.

The difference matters because options trading activity can look very different depending on which measure is used.

These figures suggest that NSE's trading business is not growing uniformly across all products.

Cash-market activity has remained strong, but derivatives growth has been relatively uneven.

This makes revenue diversification increasingly relevant for NSE's long-term earnings.

Can NSE's New Businesses Reduce Its Dependence on Derivatives?

Beyond equities and mutual funds, NSE is expanding its presence in currency derivatives, commodities, debt markets and data services.

Some of these businesses recorded strong growth during Q2 FY27.

Currency derivatives average daily trading value increased 150% YoY. Meanwhile, commodity derivatives average daily turnover during H1 FY27 reached ₹337.5 crore, compared with ₹79 crore in H1 FY26.

NSE also reported 43% YoY growth in data feed and terminal services revenue, which reached ₹165 crore in Q2 FY27. Listing services revenue increased 70% YoY to ₹150 crore, while clearing and settlement services revenue grew 32% to ₹73 crore.

These businesses offer NSE opportunities to generate revenue beyond traditional equity and options trading.

However, their current contributions remain much smaller than transaction charges from the exchange's core trading segments.

For example, revenue from data feed and terminal services was ₹165 crore, compared with ₹2,216 crore from options trading.

This shows that NSE's diversification efforts are progressing, but the company remains heavily dependent on its established trading business. The long-term opportunity lies in whether these newer segments can grow large enough to contribute meaningfully to NSE's overall earnings.

What Should NSE Investors Watch Going Forward?

NSE's Q2 results highlight a business with strong profitability, a dominant market position and growing opportunities across different financial products. However, three factors will be particularly important for understanding its future performance.

1. Sustainability of Core Earnings Growth

NSE's reported operating EBITDA increased 107%, but its normalised operating EBITDA grew 11%.

Future results will provide a clearer indication of whether NSE can accelerate underlying earnings growth without benefiting from exceptional items in the comparison period.

2. Dependence on Options Trading

With options contributing approximately 54% of operating revenue, NSE remains significantly exposed to derivatives trading activity.

Any changes in trading behaviour, market volumes or regulatory requirements could influence future earnings.

3. Revenue Contribution From New Businesses

Mutual fund orders increased 155%, while currency derivatives and several non-trading revenue streams also reported strong growth.

However, growth in activity does not necessarily translate into an equally large increase in revenue. Investors will need to assess whether these segments can become meaningful earnings contributors over time.

Author's Take

NSE's Q2 FY27 results present two different pictures. On the surface, the exchange delivered 23% profit growth and a 107% increase in operating EBITDA. However, after adjusting for last year's exceptional expenses, underlying operating EBITDA growth was a more modest 11%.

At the same time, NSE continues to demonstrate the strength of its business model. It maintained a normalised EBITDA margin of 76%, benefited from growing cash-market activity and recorded rapid growth in its mutual fund platform.

The biggest opportunity for NSE lies in expanding beyond its traditional derivatives business. Mutual funds, data services, commodities and other financial products could gradually create additional revenue streams.

However, the biggest challenge remains its dependence on options trading, particularly weekly Nifty options, which alone contribute approximately 42% of operating revenue.

For NSE investors, the real question is not how quickly reported profits grew this quarter, but whether the exchange can deliver consistent underlying earnings growth while reducing its dependence on a few major trading products.