Whalesbook
India's stock market infrastructure providers show a sharp split in performance, driven by different business models. Exchanges like BSE Ltd. and MCX have attracted investor attention with rapid gains, while depositories such as CDSL and NSDL have lagged significantly. Over the past year, MCX surged 121.7 percent, and BSE Ltd. gained 59.2 percent. In contrast, CDSL registered a 4 percent decline, and NSDL, which debuted in August 2025, shows a modest 10 percent rise from its IPO levels.
Derivatives Drive Exchange Fortunes
Analysts attribute the exchanges' outperformance to their 'volume-leveraged' business model, where they profit disproportionately from high trading volumes, particularly in the volatile Futures & Options (F&O) segment. Vaqar Javed Khan, senior analyst at Angel One, explains that exchanges like MCX and BSE see substantial profit increases from higher trades, as fixed costs are already covered. MCX's average daily turnover in F&O recently hit ₹7.5 trillion, supporting a 150 percent jump in Q3 FY26 profit on 120 percent revenue growth.
BSE Ltd.'s transformation into a derivatives powerhouse is a key driver. Equity derivatives now account for over 60 percent of its revenues, with premium market share climbing to approximately 28 percent in FY26. This shift propelled transaction income from ₹2.4 billion in FY23 to ₹24.8 billion in the first nine months of FY26, expanding EBITDA margins from 24 percent to 64 percent.
The Sustainability Question
However, the 'retail options boom' that drove these rapid gains now faces significant challenges. Khan estimates that exchange outperformance is currently 80 percent dependent on this boom, raising questions about FY27 sustainability. Three major risks loom: SEBI's proposed Securities Transaction Tax (STT) hike and position limits could compress volumes by 15-20 percent. Broader market fears, potentially triggered by AI disruption or significant Nifty corrections, could force retail option sellers to exit. Finally, the high trading volumes in FY26 will make future growth comparisons difficult.
Consequently, analysts project more normalized earnings growth for exchanges, around 20-25 percent in FY27, moderating to 12-15 percent thereafter. Hariprasad K, a SEBI-registered research analyst, suggests that while earnings are unlikely to decline, the "era of hyper-growth" may be concluding as regulatory changes temper speculative activity.
Depositories: A Shift to Quality
In contrast, depositories are described as 'account-based utilities.' CDSL, for instance, earns a predictable ₹15-25 per account annually, irrespective of trading frequency. As demat account growth slows to a six-year low of 16.5 percent in 2025, the market is re-evaluating depositories. The focus is shifting to revenue per active user and asset quality rather than just account numbers. While CDSL leads in retail volume, NSDL's institutional clients generate more revenue per account and manage greater asset custody. Hariprasad K sees NSDL as a good risk-reward option. It offers a simpler entry than exchanges, whose high growth is already reflected in their prices, and NSDL's better revenue quality is yet to be fully recognized by the market. Equirus Securities maintains an 'Add' rating on BSE with a target price of ₹3,765.