Top stock to buy today: Jefferies India sees 29% upside in NSE share price in upside scenario

Stocks to buy today | Jefferies India stock recommendations | Shares to buy today: The NSE shares have been reeling under the upper price band of ₹1,785 after hitting the record high of ₹1,878 per share on the listing date. NSE share price finished at ₹1777.05 per share on the BSE on Wednesday. However, Jefferies India is still bullish on NSE shares, provided there is a trend reversal on Dalal Street. The global investment bank has set the NSE share price target of ₹2,300 for long-term investors in the upside scenario. The Jefferies India report has also noted that, in the event of a downside trend, the NSE share may touch ₹1,600. In the base-case scenario, the NSE share price may touch ₹2,085 apiece, delivering around 17% returns to long-term investors.

NSE shares | Why is Jefferies bullish?

Calling NSE a hedge against volatility, the Jefferies India report said that India has seen a 4x increase in direct equity investors since COVID, led by younger cohorts. Yet penetration is only 3% of the population vs. 18% in China. Besides structural tailwinds, exchanges offer a volatility hedge, as revenue is positively correlated with the VIX, given that options revenue is premium-based, unlike that of global peers.

“NSE is the market leader in cash equities, index F&O, stock F&O, and clearing & settlement. While c.60% of operating revenues come from equity options, weekly index options, which have faced regulatory action, account for 40% opposit revenues (BSE: 65%). Low-turnover clients account for only 2-3%, limiting the risk from SEBI action to protect small traders. We see the equity options share in transaction revenues to fall to 50% from the current 60% over the next 5 years,” the Jefferies India report said.

Jefferies India expects fast revenue growth for NSE

Expecting fast growth in the NSE's revenue, Jefferies India said that the NSE's operating revenue CAGR was 6% between FY24-26, as its equity F&O business was adversely impacted by regulatory changes and higher taxes. We think these are now largely in the base. Hence, expect growth to improve to 15% over FY27-29e, driven by (1) equity options market share stabilising at 65%, (2) cash equity turnover growing at 16% led by IPOs, promoter/PE sell-downs, and (3) tech infra revenues growing at 23% CAGR.

Pointing towards the new avenues for revenue for the NSE, Jefferies India said, "NSE's tech infra revenues, 8% of FY26 opposite revenues and at lower AI risk, could rise to 11% by FY29e as the company adds more colocation racks (JEFe: 600 racks in 2 years). Commodity F&O, the new mutual fund ordering platform and EGRs (Electronic Gold Receipts) could add another c.15% to revenue/PAT by FY30e, which are not part of our base case. NSE is also exploring opportunities in corporate bond futures, GIFT City and Market Lens."

“We expect EBITDA margin to expand by 200bps to 78% by FY29e due to: (1) benefits from investments made in employees and technology over the last 3 years, (2) revenue growth improving over FY27-29e, and (3) scale-up of new businesses,” the global investment bank added.

NSE shares | Top 4 reasons to buy

Listing out foour major reasons for the long-term investors to buy NSE shares, the Jefferies India report said, “NSE trades at 34x FY28e EPS, a 18% discount to BSE. We have a different view. Our PT of Rs2,085 is based on 35x Dec'28e EPS, 15% premium to our fair value for BSE, considering: (1) greater diversification, (2) higher optionality, (3) higher dividend yield, and (4) structurally higher margins.”

However, the global investment bank maintained that, in the upside scenario, NSE shares may touch ₹2,300, whereas in the downside scenario, they may touch ₹1,600.