BSE, MCX shine with triple digit returns; analysts warn of F&O growth risks

The Indian capital market infrastructure has been the standout story of the last few years, but the script is beginning to flip. While exchanges like BSE and MCX captured the volatility and delivered triple-digit returns, depositories like CDSL and NSDL have remained "pedestrian" by comparison. The performance gap is a textbook study in business models.  

Over the last year, MCX surged 121.7 per cent, while BSE Ltd gained 59.2 per cent. In contrast, CDSL recorded a decline of 4 per cent. NSDL, which made its Dalal Street debut in August 2025, is up 10 per cent from the IPO levels. 

In the last three years, BSE has delivered a staggering 2,157 per cent return and MCX surging 844 per cent, while CDSL followed with a more modest 166 per cent gain. Over a five-year horizon, BSE has skyrocketed 5,082 per cent compared to MCX’s 846 per cent and CDSL’s 264 per cent rise. 

 

Vaqarjaved Khan, senior analyst at Angel One, explains the divergence, stating that exchanges are volume-leveraged businesses. "Exchanges are volume-leveraged businesses. MCX's average daily turnover (ADT) in the Futures & Options (F&O) segment surged to ₹7.5 trillion, Q3FY26 profit jumped 150 per cent to ₹401 crore on 120 per cent revenue growth. Every incremental trade drops 80 per cent to the bottom line since fixed costs are sunk. BSE similarly rode the retail options tsunami," he said. 

On the contrary, Depositories are account-based utilities: CDSL earns ₹15-25 per account annually regardless of trading frequency, Khan added. 

Hariprasad K, a Sebi-registered research analyst and founder of Livelong Wealth, noted that exchanges effectively became the primary monetisers of volatility.  

"An explosion in derivatives engineered the triple-digit rally. When volumes double, revenues scale disproportionately. While depositories are low-beta proxies on financialization, their revenues are anchored in predictable but linear annuity-like streams," he said

BSE: The derivatives inflexion

BSE’s transformation from a cash-equity platform to a derivatives powerhouse is a structural pivot. According to an Equirus Securities report, equity derivatives now contribute over 60 per cent of BSE's revenues. Its premium market share scaled to approximately 28 per cent in FY26, driving transaction income from ₹2.4 billion in FY23 to ₹24.8 billion in 9MFY26. 

Equirus highlights that BSE’s Ebitda margins expanded sharply from 24 per cent in FY23 to 64 per cent in 9MFY26. With the successful relaunch of Sensex and Bankex weekly contracts, the brokerage expects Ebitda margins to hit 66-67 per cent over FY27-28, supported by high-margin segments like co-location and data dissemination.

The sustainability question

However, the "retail options tsunami" that powered these returns faces a reality check. According to Khan, exchange outperformance is 80 per cent dependent on this boom, and FY27 sustainability is questionable. MCX's F&O ADT of ₹7.5 trillion represents 95 per cent of exchange revenues, but three headwinds loom. 

"First. Sebi's Securities Transaction Tax (STT) hike and proposed position limits are expected to compress volumes by 15-20 per cent. Secondly, AI disruption fears hitting IT sparked broader risk-off; if Nifty corrects another 8-10 per cent, retail option sellers face margin calls and exit. Third, base effect cruelty as FY26 saw a huge jump in volumes," he said.  

He expects exchanges to record earnings growth of 20-25 per cent in FY27 and then normalise to 12-15 per cent in FY28 onward. 

Hariprasad also added that while exchange earnings are unlikely to de-grow, the "era of hyper-growth" may be over. "The intensity of speculative activity is likely to moderate as higher lot sizes and tighter margin norms alter the participation curve," he said.

Depositories: Quality over quantity

As demat growth slowed to 16.5 per cent in 2025, the lowest in six years, the market is pivoting its valuation of CDSL and NSDL from "total accounts" to "revenue per active user." 

Hariprasad explained that during the retail boom, scale was the story. But as additions slow, the focus shifts to engagement and asset quality. He noted that while CDSL dominates in retail scale, NSDL’s institutional base delivers significantly higher monetisation per account and far deeper custody value. 

For the coming fiscal, Hariprasad K views NSDL as the most compelling risk-reward play. "Unlike BSE and MCX, where derivatives growth is priced in, NSDL offers a cleaner entry point. It has superior revenue quality and a dominant share of custody value that the market hasn't fully re-rated yet," he said. 

Equirus Securities has an 'Add' rating on the BSE stock, with a target price of ₹3,765.  ======================================

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