BSE vs NSE: Can NSE Repeat BSE’s Massive Growth Story? | CA Rachana Ranade

[00:00:00] Hey folks, CA Rachana Ranade here and I welcome you all to a video that you all have demanded. Look at the comments that came up on the previous video which was about the NSE IPO summary video. And you all requested for this that I should do a separate video on BSE vs NSE. Now if you look at certain important pointers, I'm sure everyone might know this that BSE has been listed on the

[00:00:23] stock exchange since 2017. But NSE has just launched its IPO wherein the IPO has opened on 17th of September and will close on 21st of September. Now if I were to look at BSE's performance, in the last year the stock has run up by almost 50% and if I were to talk about the overall CAGR from 2017 till date, the CAGR of BSE stock has been around 50%. Now I'm sure everyone will have a lot of questions

[00:00:53] around a few pointers, something like, number one what led to the growth of the stock price of BSE. Number two, BSE vs NSE, how do the numbers stack up? And number three very important, like BSE saw a dream run, can NSE repeat the story? We are going to try and answer all these questions in this video, so keep on watching the video till the end. Before we move on, I'm happy to share that I have launched

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[00:01:49] I have talked about the latest changes like cash in this course. I have talked about something like an ETF investing strategy in the course and there are in all 80 plus beginner friendly concepts. So if you want to start your stock market learning journey, this is the course you begin with. Don't forget to use the coupon code CRRYT while you enroll for this course. Now just in case if you have imagined that the

[00:02:13] BSE stock might have gone up 50% this year, then 50% next year and then again 50% every year since 2017 till date, that's not the right way to look at CAGR. Because CAGR is like an average growth rate which is compounded over those many number of years. It's not like every year return. So if I were to tell you what happened to the stock after listing, here's what I have to show you. Now I am on Screener, I am on TradingView and if you see here, this was the first month of listing February 2017.

[00:02:42] It hit an all-time high at that time which was 133 okay and after that the stock went a little bit sideways and then kept on going down and down and down and it hit a low of 31 rupees during the COVID lows. Slowly steadily it recovered back to its IPO month high and this was when 2021. So you can imagine any

[00:03:07] person who had invested in BSE in 2017 till 2021 that person had eventually no returns okay. Now if you check what happened post that, the stock started to go up but after a nice round upward again it retested back to the same level which was the IPO first month listing and this was in March 2023. Now

[00:03:30] look at what happened after March 2023. There was a dream run by BSE from March 23 to March 24. Have a look at what I mean what was a crazy run up that the stock saw and I'm sure everyone would be really interested to understand what could be the key reasons for the overall growth for the stock. There are multiple reasons I'm going to tell you one by one. See the very first one was new leadership and derivatives

[00:03:56] relaunched. Mr. Sundar Raman Ramamurthy, he took over as the MD and CEO when in January 2023. Now a decision was taken under his leadership that BSE should relaunch Sensex and Bankex derivatives when in May 2023. If you remember that was the month where there was a breakout and retest point happened in May 2023. That was a month when Sensex and Bankex derivatives were going to be relaunched. What was so special about

[00:04:26] that? Number one, smaller lot size. Number two, the expiry day was differentiated as compared to Nifty expiry day and very important because of the lower lot size what happened was that the overall contract size for Sensex came around 6 lakh rupees whereas the contract size for Nifty was around 9 lakh rupees because of which the capital requirement for one lot of Sensex was pretty much lower as compared to one

[00:04:55] lot of Nifty. Now did this reduce the capital requirement for traders? Absolutely yes, this gained more popularity for Sensex. Second one was the expiry day shuffle. Now I'm sure everyone knows about this that right now Nifty expires on Tuesday and Sensex expires on Thursday. But what when did this change take place? Barely a year ago. Before that it was exactly reverse where Sensex used to expire on

[00:05:21] Tuesdays and Nifty used to expire on Thursdays. Now many experts say that the index that gets Thursday as an expiry date gets some advantage and that is what Sensex got as an advantage. One more very, very important point that happened in November 2024 was that every exchange was told that you can have or you can offer only one weekly derivative expiry. So if you remember for Nifty, it was a bouquet of

[00:05:51] derivative expires. They had Nifty as a weekly expiry. They had Bank Nifty as a weekly expiry. They had FinNifty as a weekly expiry. They had MidCap Nifty as a weekly expiry. But then you know when Sebi said only one weekly expiry, they were required to forego the revenue from all the derivatives trading and only one exchange which is only one index which is Nifty was allowed as a weekly expiry. And same for Sensex also, BSE also only one weekly expiry. But the thing is that for BSE, only two were popular. One was

[00:06:20] BankX and Sensex and out of those two also Sensex was very popular. So this decision did not bring in a very big dent for BSE but it did bring a dent to NSE. Now one more point is that see whenever we are talking about exchanges, exchanges have a big fixed cost. But if the turnover keeps on increasing, if the volume keeps on increasing, what increases is their operating leverage. And if you have a look at their operating profit margins, have a look at this. Oh my god, haven't their operating profit

[00:06:48] margins significantly increased from March 23 to March 26. And even if you look at TTM slightly lower, but whatever, till March 26, it has continuously increased. All these things led to an earnings increase and it also ultimately led to a re-rating in BSE. So I hope you have understood that what led to the growth of BSE. But important point is that now if I were to compare BSE with NSE, we have to

[00:07:14] check how the numbers stack up. And that's what we want to check in the next section of the video. Now if I were to check or compare the total revenue from operations, I mean, NSE is way bigger as compared to BSE. NSE's revenue as at FY 26 basically stands at 16,601 crores. Whereas for BSE it's just 4,833 crores. But if I were to compare a year on year increase, for BSE the year on year increases at 63.45%

[00:07:41] and for NSE it is minus 3.15%. Now out of this total revenue, how much revenue is generated from transaction charges? Transaction charges accounts for 78.51% of the total revenue for BSE. And even for NSE, it is 78.65%. So can I say transaction charges is extremely important for both the exchanges? And answer is yes. Now again an important point here for BSE, the growth, YOY growth for transaction charges

[00:08:08] is 86.95%. But for NSE, it's minus 4.24%. Now out of transaction charges, which segment contributes the most? If you have watched my NSE IPO video carefully, you already know the answer. But for those who did not, it is equity options. Now if I were to understand equity options, if you can check here, BSE accounts for, I mean in BSE, equity options account for 64.85% of the total turnover. Whereas

[00:08:36] for NSE also it's 60.22%. So can I say options, so money received from options, the transaction fees received from options trading, is that a big one? Equity options. Answer is yes, for both. And here's the catch. That for BSE, the YOY increases 121.43%, but for NSE, it's minus 1.93%. Bucky for cash, equity futures, it's a smaller one. If you want, you can pause the video and check out these two

[00:09:03] comparative figures. For listing services, if you see growth, BSE growth is 5.94%, but NSE growth is 12.3%. For co-location, again a big difference. NSE YOY growth is 5.96%. For BSE, it's 130.42%. Is it because of the numbers are very different? No. NSE FY26 numbers for co-location is 133.4 crores,

[00:09:29] and for BSE, it's 171.09 crores. So BSE's co-location revenue is also higher and still their YOY growth is also on a higher side. Now, some other pointers for revenue. Again, if you want, you can pause the screen. These are very chill or very small numbers. So you can compare one by one if you want. Now coming to market share. Here, NSE is, I mean, hands down, a big market share holder. Why? You can see that on screen. Turnover market share FY26, NSE is 92.99%, BSE only 7.01%.

[00:09:58] If I were to understand even others, so for example, equity future shares, look at that 99.79%, BSE 0.21%. For equity premium share, so equity options premium share, you can see for FY26, but before I call out this number, let's understand the share went from what to what? For equity options

[00:10:20] premium share, as at 2024, the share of NSE was 96.86%. From that, it dropped to 74.71%. And as at Q1 FY27, it has dropped further to 68.48%. So NSE is clearly losing its equity options premium share. What about BSE? BSE had a market share of only 11.4% in October 2024. That jumped to 25.29%

[00:10:48] in FY26. And by Q1 FY27, it has jumped further to 31.52%. So BSE is clearly gaining ground as far as equity options premium share is concerned. Now you might be like, why BSE's equity option market share is increasing. I already told you, top three reasons. If I were to just quickly sum up. One, if you remember, I told you BSE relaunched Sensex and Bankex with smaller lot size. I also told you

[00:11:14] how the weekly expiry limits impacted NSE more as compared to BSE. I also told you that their expiry shifted from Tuesday to Thursday, which also had a positive impact. So these were the top three amongst many other reasons. Now, if I want to quickly also check PAT, we obviously discussed already about revenue that NSE's revenue is way higher than BSE. For PAT, again, NSE's PAT is way higher than BSE.

[00:11:40] But if you check growth wise, their PAT for NSE has, I mean, has grown at a negative, basically, it's a negative growth of minus 15.47%. But for BSE, it's 88% growth for PAT as well. Operating EBITDA margins, more or less similar. PAT margins, more or less similar. Return on net worth, BSE has a higher return on net worth. Even if you want, you can check the Q1 FY27 numbers

[00:12:03] as well. Well, that's how the financials stack up. If I were to just talk about one final point, which is PE ratio. NSE's PE ratio stands at 42.89 times. Of course, the price has been taken at the upper price band of 1785. And as it's 16 September, BSE's PE ratio is around 47 times. Now, one small point of addition, I'm sure everyone knows about this. But just as a reiteration,

[00:12:29] NSE will get listed only on BSE. So whatever turnover on this stock happens, that is going to again have benefit only for BSE. So I hope you have understood how BSE versus NSE stack up. And now in the last section, we'll talk about can NSE repeat the same growth story as BSE? Now, the very first reason is the base effect. See, BSE's returns came from a very low market share,

[00:12:54] near zero market share to almost 25 to 30% market share. If you remember, we have talked about this, the share of BSE in equity options, right? Now, if I were to talk about NSE, NSE stacks up completely differently. How? Because if I'm talking about cash market turnover, NSE already has a 92.99% market share. How much more are they going to grow? They have a scope of only 7% left to hit the 100%

[00:13:18] mark. If I were to talk about equity futures, they already have a market share of 99.79%. So how much room is left to grow? So cash market almost grown, equity futures to almost at 100%. There's no scope for growth. For equity options, they are already losing ground, right? So if I were to compare BSE and NSE, their growth trajectory is completely different, because BSE started almost from 0% market share,

[00:13:45] whereas NSE is at 90% market share at two big segments, right? The second point for can NSE repeat the BSE story is about the regulations that creates great sensitivity for the earnings. Now, if you remember, I had already told you about the weekly expiry options. Nifty as a trading index is like a super hit. Then if I talk about, I mean, it's very popular instead of saying super hit, it's very

[00:14:11] popular amongst traders. If I'm talking about bank Nifty, oh my god, it was so popular for a weekly expiry as well. Fin Nifty was very popular. Mid-cap Nifty was very popular. Now, what could be a growth driver for NSE? All these which were cut down and only one weekly expiry, that was what SEBI told. If tomorrow SEBI says, we are okay introducing multiple options or multiple index expiries

[00:14:38] by each exchange and go ahead, introduce bank Nifty, Fin Nifty, and what mid-cap Nifty, whatever, few more, no problem. In that case, that can be a very big positive for NSE. But looking at what SEBI is doing right now, I don't feel SEBI is going to do that. In fact, I have read certain news which says that they may even think about moving weekly single index expiry also to a monthly

[00:15:02] expiry. Now, can that hamper growth if that happens? Answer is yes. Okay. Now, there could be multiple other factors also. For example, let's say STT increases. Can that also dampen the growth? Of course, not only for NSE, that will happen for both BSE and NSE. Now, what could be multiple other growth drivers? So, if you say that, but what about the number of people who are investing in stock market? They are going to grow, of course, but that will be a growth driver again for both BAC

[00:15:29] and NSE. If you talk about more and more assets, more and more IPOs listing in the market, again, it will be a growth driver for both. If I'm talking about Gift City, like NSE has NSE IX, BAC has India INX. So, again, it will be a growth driver for both of these exchanges. All in all, two pointers were the differentiators for BAC versus NSE. Otherwise, growth drivers are going to remain more or less similar. So, ultimately, what you feel, can NSE repeat the growth story for

[00:15:58] BSE? I want even your thoughts in the comment section below. I hope you found a lot of value in today's video where I tried an honest effort to compare both these companies based on data which is available. If you did like the video, please don't forget to smash the like button. Please don't forget to share this video with your friends. I'll see you in the next one till then. Take care.