National Stock Exchange lowers its maximum IPO valuation target to around $47 billion after global investors question derivatives-led growth and regulatory risks ahead of its long-awaited listing

The National Stock Exchange of India (NSE) has reportedly lowered its maximum valuation target for its much-awaited initial public offering (IPO) by around 15 per cent, following concerns from global investors over the sustainability of its derivatives-led growth model.

The exchange had initially sought a valuation of roughly $55 billion, but investor feedback during overseas roadshows in Hong Kong, London and New York has pushed the expected valuation down to around $47 billion.

Even at the revised valuation, NSE would remain among the most highly valued listed exchanges globally, raising questions over whether investors are willing to pay a premium for the Indian bourse amid tighter derivatives regulations and slowing options activity.

NSE IPO Price Band at ₹1,700–₹1,785

NSE is preparing to launch its IPO with a proposed price band of ₹1,700 to ₹1,785 per share, according to people familiar with the offering.

The exchange may also reduce the portion of equity offered through the IPO to around 5.5 per cent, compared with the previously planned 6 per cent.

At the upper end of the proposed price band, the offering could raise approximately ₹24,300 crore, assuming the 5.5 per cent stake is sold.

The issue would be entirely an offer for sale (OFS) by existing shareholders, meaning the proceeds would largely go to selling investors rather than directly into NSE’s balance sheet.

Valuation Remains a Major Investor Concern

At the proposed valuation, NSE would be valued at around 43 times its fiscal 2026 earnings.

This valuation would place the exchange at a substantial premium to several of the world’s largest listed exchanges. According to the data cited in the report, the top four global exchange peers trade at roughly 24 times earnings.

The valuation debate was reportedly one of the central issues during NSE’s international roadshows.

NSE management has argued that the exchange deserves a premium because its growth rate has been significantly faster than that of global peers. However, some investors remain concerned that the premium may not be justified given India’s tighter regulatory oversight of derivatives markets.

Derivatives Boom Faces Regulatory Headwinds

The biggest challenge to NSE’s valuation story is the changing landscape of India’s derivatives market.

Options trading has been a major driver of NSE’s profitability, accounting for around 60 per cent of operating revenue in the financial year ended March 2026.

However, regulatory measures aimed at reducing excessive speculation and protecting retail investors have started to affect derivatives activity.

India’s securities regulator has increased scrutiny of the derivatives market after data showed that retail investors collectively lost more than $40 billion in equity derivatives over five years through March 2026.

The regulatory focus has raised concerns about whether NSE can continue to grow its most profitable business at the pace seen in previous years.

NSE’s Profitability Still Remains Strong

Despite concerns over future growth, NSE remains an exceptionally profitable financial-market infrastructure business.

For FY26, the exchange reported approximately ₹16,600 crore in revenue and ₹10,300 crore in net income, translating into a profit margin of around 62 per cent.

However, profitability has moderated from roughly 71 per cent a year earlier.

The decline highlights the challenge facing the exchange: while NSE continues to generate substantial profits, investors are increasingly focused on whether earnings growth can remain strong after the derivatives boom loses momentum.

Options Turnover Shows Signs of Cooling

The slowdown in derivatives activity has become increasingly visible in trading data.

The average daily notional turnover for futures and options on NSE reached an 18-month low in August, according to exchange data.

At the same time, smaller rival BSE has been gaining market share in the options segment.

Additional restrictions on lending to proprietary trading firms could also affect trading volumes, potentially creating another headwind for NSE’s transaction-based revenue.

NSE’s Dominant Market Position Is a Strength

Despite the challenges, NSE continues to enjoy an exceptionally strong competitive position in Indian financial markets.

According to its prospectus, NSE held approximately:

• 74.71 per cent share of equity options

• 92.99 per cent share of cash equities

• 99.48 per cent share of exchange-traded currency futures

This dominance provides the exchange with significant scale, liquidity and network effects.

However, its dominant position also creates a growth challenge. With such high market shares in several major segments, capturing additional market share becomes increasingly difficult.

This means future growth may have to come from new products, higher monetisation and non-transaction businesses.

Commodity Derivatives Could Offer a New Growth Avenue

One potential area of expansion is commodity derivatives.

NSE could leverage its existing technology infrastructure and relationships with brokers to increase its presence in commodity markets and compete more aggressively with established players such as Multi Commodity Exchange of India.

A successful expansion into commodities could diversify NSE’s revenue base and reduce dependence on equity derivatives.

However, building significant market share in an established segment would require competitive pricing, liquidity and participation from traders and institutional investors.

Data and Analytics May Become Increasingly Important

Another potential growth opportunity lies in market data, indices and analytics.

Global exchanges such as Nasdaq have developed businesses that generate substantial revenue from data, analytics, index licensing and other non-transaction services.

NSE has a large pool of market data and index-related assets that could potentially be monetised more aggressively.

Some investors believe these businesses could provide a more sustainable source of growth because they are less directly dependent on daily trading volumes.

The positive surprise for NSE could therefore come from index licensing, market data and analytics, particularly if transaction-based revenue growth slows.

Foreign Investors Remain Divided

Investor sentiment towards the IPO appears mixed.

More than 120 global funds, including large international investment names, reportedly participated in NSE’s overseas investor meetings, demonstrating significant interest in the listing.

However, enthusiasm has moderated compared with the earlier stages of the IPO process.

Some investors believe NSE remains an attractive long-term play on India’s growing participation in financial markets, while others argue that the valuation already prices in a substantial portion of the company’s future growth.

Existing Shareholders Stand to Gain

The IPO could provide significant gains to several long-term shareholders who invested in NSE before its public listing.

Major shareholders include institutions such as Life Insurance Corporation of India, as well as investors linked to technology entrepreneur Azim Premji.

Morgan Stanley, Temasek Holdings and State Bank of India are also among shareholders expected to benefit from the IPO, according to the company’s draft prospectus.

Global funds held around 31.35 per cent of the exchange as of December 2021, with their combined ownership subsequently declining to approximately 26.41 per cent by June 2026.

A Listing More Than a Decade in the Making

NSE’s IPO journey has been unusually long.

The exchange was ready to pursue a listing as early as 2016, but the process was delayed following regulatory scrutiny surrounding alleged preferential access to market data through co-location facilities.

Years of legal proceedings and regulatory investigations followed, along with changes in the exchange’s senior management.

The path towards a public listing became clearer after SEBI granted approval in January 2026. NSE subsequently agreed to a ₹1,491 crore settlement in July to resolve past disputes.

The IPO now represents the culmination of a process that has stretched across more than a decade.

NSE’s Long-Term India Growth Story Remains Intact

Despite the concerns around derivatives, NSE continues to benefit from the structural growth of India’s financial markets.

More households are shifting savings towards equities, mutual funds and other financial assets. Rising retail participation, increasing demat account penetration and the expansion of India's investor base could provide NSE with a growing pool of users over the long term.

The exchange’s challenge will be converting this structural growth into sustainable revenue without relying excessively on speculative derivatives trading.

Regulatory Risk Remains the Biggest Variable

For prospective NSE investors, regulatory risk is likely to remain a major factor in determining the stock’s valuation after listing.

Any further restrictions on options trading, leverage or participation by proprietary trading firms could affect transaction volumes.

At the same time, regulators are likely to balance investor protection with the need to maintain healthy and competitive capital markets.

The outcome of this regulatory evolution will have a direct bearing on NSE’s earnings trajectory.

What Investors Should Watch

Investors evaluating the NSE IPO should closely monitor:

• IPO valuation and final price band

• Equity derivatives volumes

• Options market share

• Regulatory changes affecting F&O trading

• Growth in cash-market transactions

• Revenue from data and analytics

• Index licensing income

• Commodity derivatives expansion

• BSE’s competitive gains

• Long-term retail investor participation

The key question is whether NSE can maintain its exceptional profitability while successfully diversifying its revenue base.

Market Outlook

NSE remains one of India’s most strategically important financial-market infrastructure businesses, with dominant market shares, strong profitability and exposure to the country’s expanding financialisation trend. However, the 15 per cent reduction in the targeted valuation reflects growing investor caution over derivatives-led growth and regulatory intervention.

At around $47 billion, NSE would still command a premium valuation compared with several global exchange operators. The long-term India growth story remains attractive, but investors will need to assess whether future earnings growth can justify that premium.

The IPO could offer exposure to India’s expanding capital-market ecosystem, but valuation discipline will be crucial. The sustainability of derivatives volumes, growth in non-transaction revenue and the regulatory environment will likely determine whether NSE can deliver the growth expected by public-market investors.