Dolat Capital initiates coverage on NSE with a bearish call, forecasting a 26% downside from unlisted market prices ahead of the exchange's IPO.
Alpha Score of 67 reflects moderate overall profile with strong momentum, strong value, weak quality, moderate sentiment.
India's National Stock Exchange has received a rare sell recommendation from a local brokerage just weeks before the exchange operator is set to launch the country's largest initial public offering.
Dolat Capital initiated coverage on NSE with a target price of 1,550 rupees, a 26% discount to the stock's current price of 2,085 rupees in the private trading market. Analyst recommendations on unlisted companies are uncommon in India and globally, making the call stand out ahead of the listing.
Analysts led by Punit Bahlani wrote that tighter regulations on India's equity derivatives market would crimp trading volumes and lead to a decline in NSE's market share. The impact of falling proprietary trading volumes and the loss of share in index options would limit the exchange's profit and growth rates, they said. While the brokerage does not dispute NSE's long-term structural growth story, current valuations fail to reflect the regulatory headwinds.
NSE's shares in the unlisted market are down 3% over the past 12 months, according to data from unlistedzone.com. The exchange commands a market value of 5.2 trillion rupees.
Dolat is forecasting NSE's options trading turnover to decline at an annualized rate of about 4% between fiscal 2026 and 2029. Tighter regulations and lower retail participation will weigh on activity, Bahlani wrote. The brokerage also initiated coverage on listed peers BSE Ltd. and Multi Commodity Exchange of India Ltd. with sell ratings.
India's derivatives market has undergone sweeping regulatory changes over the past two years to check excessive speculation. These include increased contract sizes and restrictions on weekly options contracts to one benchmark index per exchange. The report highlights that NSE's valuations in the unlisted market are higher than global peers even as its profit growth lags.
NSE filed for an estimated $3 billion IPO in recent weeks and targets a September listing, subject to approval from the Securities and Exchange Board of India. Unlike most unlisted companies, NSE is extensively followed by analysts because its disclosure standards and quarterly financial reporting are broadly comparable with listed peers. The exchange also conducts earnings calls, and its shares are actively traded in India's unlisted market, where price movements and transfer data are disclosed periodically.
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