Dolat Cuts NSE to Sell Ahead of $3 Billion IPO
Dolat Capital has issued a rare sell rating on unlisted National Stock Exchange shares, warning that India's derivatives crackdown will erode the exchange's market share and challenge the premium pricing of its upcoming $3 billion listing.
Dolat Capital Market has initiated coverage on the National Stock Exchange of India (NSE) with a sell recommendation, assigning a target price of ₹1,550. This represents a steep 26% discount to the bourse's current price of ₹2,085 in the unlisted share market. The bearish call arrives just weeks after NSE filed papers for an estimated $3 billion initial public offering, targeting a September listing on rival exchange BSE because Indian regulations prohibit self-listing.
The downgrade centers on sweeping regulatory changes imposed on India's futures and options market over the past two years. Authorities have increased contract sizes and restricted weekly expiring options contracts to a single benchmark index per exchange in a concerted effort to curb excessive retail speculation. Analysts at Dolat forecast these tighter rules, combined with waning retail participation and an anticipated weaker market cycle, will cause NSE's options trading turnover to contract. They project an annualised decline of roughly 4% between fiscal years 2026 and 2029.
Despite operating the world's largest derivatives exchange by trading volume, NSE's profit growth currently lags its international peers. Dolat highlighted that the exchange's valuations in the unlisted market are disproportionately high compared to these global competitors. This premium pricing leaves little room for investor upside as the regulatory environment compresses trading volumes and threatens NSE's dominance in index options. The brokerage extended its pessimistic view across the sector, simultaneously initiating sell ratings on listed domestic rivals BSE Ltd. and Multi Commodity Exchange of India Ltd.
Issuing analyst recommendations on unlisted companies is an exceptionally rare practice in India and globally. NSE, however, functions as a unique case because its disclosure standards and quarterly financial reporting closely mirror those of publicly traded companies. The exchange routinely holds earnings calls, and its shares trade actively in the unlisted market with regular price disclosures.
In their note, analysts led by Punit Bahlani wrote that the "impact of the decline in proprietary trading volumes and the loss of market share in index options would limit the exchange’s profit and growth rates." The brokerage acknowledged it "doesn’t dispute NSE’s long-term structural growth story," but warned that "current valuations fail to reflect the regulatory headwinds."
