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Only 3.2% of working Indians trade stocks. Why Morgan Stanley likes NSE

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In short

The National Stock Exchange maintains structural dominance by commanding over 90% of cash market volume and near total control of equity futures. High regulatory barriers and an asset-light operating model helped lift its normalized operating EBITDA margin to 76.2% in fiscal 2026. However, future performance remains vulnerable to regulatory interventions, changing tax regimes, and shifts in active trading turnover.

Key points

  • Normalized profit after tax is projected to climb from Rs 1,12,658 million in FY27 to Rs…: Normalized profit after tax is projected to climb from Rs 1,12,658 million in FY27 to Rs 1,48,852 million in FY29.
  • Projected compound annual growth of 15 percent in revenue and earnings is underpinned by…: Projected compound annual growth of 15 percent in revenue and earnings is underpinned by formidable competitive moats across all segments.
  • Potential headwinds to long-term valuation include sudden regulatory interventions, unexp…: Potential headwinds to long-term valuation include sudden regulatory interventions, unexpected tax adjustments, and weaker product adoption.

Sources checked by our analysis pipeline: 1

“Indian exchanges are an attractive industry—large but underpenetrated, and therefore growing,” Morgan Stanley said in its report.

Only 3.2% of India’s working-age population trades on the NSE cash market, while just 0.7% participates in equity derivatives, according to the brokerage. India’s equity options premium turnover is also only about 20% of that of the US.

Morgan Stanley said this points to a long-term growth runway for the exchange. Cash-market average daily traded value has grown at 1.9 times the nominal GDP growth rate over the past decade, it said.

The brokerage expects deeper capital markets, rising participation and the financialisation of household savings to support NSE’s growth. However, it cautioned that the pace of expansion will depend on product adoption, taxation and regulation.

NSE’s core advantage is its liquidity, which Morgan Stanley said creates self-reinforcing network effects.

The exchange has sustained more than 90% market share in cash equities and nearly 100% in equity futures and stock options. Its market share in index options has moderated but is likely to stabilise at around 65%, the brokerage said.

“Liquidity attracts liquidity,”…

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