Whalesbook
RTA Momentum Outpaces Depositories in India
Axis Capital's latest market assessment shows different growth paths for India's capital market infrastructure. The report focuses on depositories and Registrar and Transfer Agents (RTAs). While the whole sector is set for long-term expansion due to more retail investors and savings being financialized, near-term performance will depend on specific segments. This suggests RTAs are better placed for faster earnings growth and potentially higher stock values.
As of April 16, 2026, NSDL traded around ₹935 with a target of ₹1,000 (about 7% upside). CDSL was at ₹1,355 with a target of ₹1,425 (about 5.2% upside). In contrast, KFin Technologies, at ₹955, has an Axis Capital target of ₹1,200, suggesting 25.7% growth. CAMS, at ₹732, is expected to reach ₹850, an increase of 16.1%.
This difference highlights Axis Capital's view that growth drivers are translating into stronger profit increases for RTAs. The Nifty Capital Markets index rose 1% on April 16, 2026, beating the Nifty50, showing investor interest in the sector despite varied stock outlooks.
RTAs Drive Growth, Depositories Face Constraints
The analysis highlights RTAs as beneficiaries of strong mutual fund growth, especially via Systematic Investment Plans (SIPs). These companies are using their customer mix and opportunities to expand overseas, expecting earnings growth to beat revenue growth. KFin Technologies is set for faster growth, while CAMS benefits from its leading role in servicing domestic mutual funds. Both RTAs and depositories have business models that require few assets and offer healthy operating margins (around 40-50%), with most revenue recurring, which provides stability.
However, depositories like CDSL and NSDL face a more limited outlook. While steady earnings growth is expected from more investors and transactions, near-term gains could be capped. Factors like shrinking profit margins – a common trend in mature businesses or due to competition – and possible new fee rules could slow growth. NSDL's P/E is around 50.2, and CDSL's is about 59.5. CDSL's P/E is significantly higher than its 10-year average, suggesting a high valuation that might limit upside unless earnings accelerate substantially.
Regulatory Risks and Margin Pressure for Depositories
Axis Capital points to specific risks that could slow depositories' growth. Margin normalization means high operating margins might come under pressure, possibly from increased competition, technology investments, or efficiencies passed to clients. Regulatory pricing pressures are also a constant factor for market infrastructure firms, directly impacting revenue. While the recurring nature of depository and RTA income offers some resilience unlike volatile broker revenues, new regulatory fee changes could challenge depositories. The high valuations for CDSL and NSDL, trading well above their 10-year averages, suggest the market might not be fully accounting for these potential margin and regulatory risks, creating vulnerability.
Growth Forecasts and Valuations Compared
Axis Capital forecasts earnings for depositories to grow at about 15% annually (CAGR), while RTAs are expected to reach a stronger 22% CAGR between FY26-28. This difference in expected growth is reflected in the stock targets, showing higher potential gains for RTAs like KFin Technologies (26%) and CAMS (16%) compared to NSDL (7%) and CDSL (5.6%). The report notes that recent market drops have made valuations more reasonable, with previous concerns about slower growth and regulatory issues now largely factored in. India's economy, projected to grow at 6.6% in FY27, provides a steady environment for domestic sectors like capital market infrastructure. However, ongoing global issues, such as oil price shocks from the Middle East conflict, remain a key external risk that could affect market sentiment and investor willingness to take on risk.