B&K Securities positive on Indian stock exchanges; initiates 'Buy' on BSE

According to B&K Securities, Indian exchanges-- BSE, NSE--are structurally well-placed as market depth and product maturity increase.

B&K Securities has turned positive on India’s stock exchanges, calling them direct beneficiaries of the country’s capital market growth across both primary and secondary segments. The brokerage has initiated coverage on BSE with a ‘Buy’ rating and a target price of ₹3,303 per share, valuing the exchange at 40x FY28E core profit and implying healthy upside from current levels.

 

It also highlights the strong positioning of the National Stock Exchange of India (NSE, unlisted) alongside BSE, as both platforms benefit from rising retail participation, technology-led efficiencies and product innovation.

Long runway from retail participation, digitisation and financialisation

According to B&K Securities, Indian exchanges are structurally well-placed as market depth and product maturity increase. The retail runway remains long, with around 120 million unique PANs registered, but only about 45 million annually active clients are currently engaged.

 

 

Structural tailwinds such as digitisation across the ecosystem, expanding distribution reach and the continued financialisation of household savings are expected to keep expanding the addressable investor pool, supporting long-term growth for both BSE and NSE.

 

The brokerage also notes that after a temporary pause following last year’s regulatory changes, both exchanges are “well-positioned to resume compounding” as participation broadens and products deepen.  CATCH STOCK MARKET LIVE UPDATES TODAY

Beyond transaction charges

B&K points out that Indian exchanges remain heavily dependent on transaction charges, which account for about 77 per cent of NSE’s revenue and 76 per cent of BSE’s. It expects transaction-charge-driven revenue growth to recover to mid-to-high teens as options activity normalises.

 

However, the brokerage believes incremental upside will be driven by a higher contribution from colocation and clearing services. Rack additions by both exchanges are seen as critical for deepening institutional participation. For BSE specifically, colocation already contributes around 4 per cent of revenue and is “set to scale through steady client onboarding and capacity expansion,” B&K notes.

Strong operating leverage, high profitability and durable moats

The report underlines the strong operating leverage of Indian exchanges, reflected in high profitability: 

 

H1FY26 operating margins: 

• NSE: 77 per cent 
• BSE: 65 per cent 

Robust return on equity (RoE):

• NSE: 35 per cent
• BSE: 44 per cent. 

B&K argues that liquidity-driven network effects create high entry barriers in this effective duopoly, supporting the sustainability of premium trading multiples. As liquidity deepens, the value of each platform to participants rises, reinforcing competitive moats.

 

Disclaimer: View and outlook shared belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.