STOCKS | Morgan Stanley, JPMorgan Initiate Coverage of India's National Stock Exchange With Overweight Ratings

Morgan Stanley and JPMorgan initiated coverage of India's National Stock Exchange (NSE) with Overweight ratings, while Indian brokerage 360 ONE Capital Markets also recommended Buy. According to Sina Finance, Morgan Stanley set a 12-month target price of 2,315 rupees, implying up to 30% upside from last Friday's close; JPMorgan set a target of 2,130 rupees, and 360 ONE set a target of 2,100 rupees. Affiliates of all three firms participated in NSE's IPO underwriting. NSE shares have traded below their IPO price for most of the time since listing in September. The bullish views reflect confidence in the long-term expansion of India's capital markets, while concerns about slower short-term derivatives growth have not changed the outlook. Morgan Stanley called NSE the “engine of India's capital markets” and a strong investment in the financialization of household savings and continued flows into equities. Among India's working-age population, 3.2% participate in NSE's cash market and 0.7% trade stock derivatives. Analysts cited NSE's dominant position and asset-light model as support for a premium valuation. Its share of the cash equities market exceeds 90%; it has near-total shares in stock futures and single-stock options, while its share of index options has held at about 65%. Jefferies said newer businesses, including commodities, a mutual fund subscription platform and electronic gold receipts, could reduce NSE's reliance on stock options and add about 15% to revenue and profit by fiscal 2030. In a research report, 360 ONE analyst Swarnabha Mukherjee wrote that a recovery in capital markets, combined with growth potential in other business segments, would further boost earnings.