How to play the capital market theme? Analysts prefer Exchanges over AMCs

Capital market stocks to buy in India: Analysts prefer exchanges and intermediaries over AMCs citing strong operating leverage, rising retail participation, record SIP inflows

Amid a “structurally altered” landscape of India’s capital markets, driven by a rise in retail investor participation in equity investing, analysts see the sector presenting noteworthy investment opportunities.

 

While both asset management companies (AMCs) and stock exchanges/intermediaries are clear beneficiaries of the rise in retail investor participation, Puneet Sharma, chief executive officer (CEO) and fund manager at Whitespace Alpha, a CAT-3 Alternative Investment Fund, believes the exchanges and intermediaries segment offers a more compelling risk-reward profile.

 

“The exchange and depository ecosystem enjoys strong operating leverage and annuity-like revenue streams. As their businesses scale with growing volumes, they benefit directly from broader market participation,” he said.

 

Exchanges and intermediaries comprise players like NSE (unlisted), BSE, MCX, CDSL, NSDL, and CAMS, while asset management companies (AMCs) and brokerages include HDF AMC, Groww, Aditya Birla Sun Life AMC, Nuvama Wealth Management, Motilal Oswal Financial Services, etc.

 

India's rising equity cult 

India's equity cult has seen a steady growth since the Covid-19-led stock market crash in 2020. As of October 2025, the total number of dematerialised (demat) accounts stood at 210 million, a stellar rise from just 40 million accounts in February 2020, according to data from depositories.

 

Besides, the markets have seen a steady rise in systematic investment plans (SIPs) with monthly SIPs hitting a record high of ₹29,529 crore in October 2025, with the assets under management (AUM) of the mutual fund industry reaching an all-time high of ₹80 trillion.

 

“Over the last 10/20 years, the domestic equity market capitalisation has seen 18 per cent/15 per cent CAGR and has reached $5.3 trillion/₹475 trillion. Further, India’s penetration of demat accounts is at 13 per cent, lower than China and the US, providing a mid-to-long-term investment opportunity,” said a note by B&K Securities.

 

Prashanth Tapse, senior vice-president of research at Mehta Equities, said investors can have a diversified exposure with an overweight stance on exchanges and intermediaries, followed by AMCs and brokerages.

 

“Exchanges/intermediaries' revenue is largely volume-linked rather than market-direction dependent, creating earnings visibility. Rising retail activity directly fuels derivatives turnover, cash volumes, data services, and ancillary revenue pools,” he said.

 

Moreover, since exchanges/intermediaries operate in an oligopolistic environment with high entry barriers, stable regulatory oversight, and strong cash positions, they enjoy high operating leverage, superior return on equity (RoEs), and relatively lower earnings volatility, he added.

 

The earnings of AMCs and brokerages, meanwhile, remain sensitive to market swings, and higher competition. Discount brokerages especially deal with rising competition and stricter regulations, which may limit near-term upside, analysts said.  CHECK EARNINGS COMPARISON

 

Regulatory overhangs 

Analysts cautioned against regulatory risks for the entire capital market sector.

 

Exchanges' business volumes, they said, are prone to changes in/capping of weekly expiries, shifting monthly expiries to a single day, increased size of options contracts, among others.

 

AMCs and brokerages, meanwhile, may face margin compression and higher costs due to the requirement of holding higher intraday liquidity buffers, possible explicit disclosure of expenses and changes to TER/fee structures, and verifying return histories.

 

Investment strategy 

Raj Gaikar, research analyst, SAMCO Securities, believes exchanges and intermediaries could form the core exposure given their steady, activity-linked growth, while high-quality AMCs can be added for additional upside.

 

Brokerages, he said, may be approached more tactically due to valuation and regulatory risks. He prefers CDSL, BSE, and HDFC AMC.

 

Prashanth Tapse of Mehta Equities suggests a buy-on-dips strategy in BSE, MCX, CAMS, CDSL, HDFC AMC, Nuvama, Groww, and Angel One.