NSE v/s BSE

Everyone knows NSE is ahead on almost every operating metric.
It controls 85–95% of trading volumes.
It has far higher daily turnover and deeper liquidity.
It dominates derivatives almost entirely.
NSE is far superior in terms of technology

And the financials tell the same story.
NSE has a much higher net profit margin of ~70%, compared to BSE’s ~43%.
NSE’s return on equity is ~40%, versus BSE’s ~36%.
Both have zero debt.
On volumes, revenues, margins, and efficiency — NSE is the stronger exchange.

Yet the puzzle remains:
NSE trades at a far lower valuation multiple than BSE.
BSE’s P/E is 65.39.
NSE’s P/E is 39.09.
This is the opposite of what the fundamentals suggest. So why might this be the case?

One possibility is expectation dynamics.
BSE is growing from a smaller base — so its improvements appear sharper.
NSE is already dominant — so its growth looks steady rather than explosive.
Markets often reward the “catching up” story more than the “already on top” story.

But this explanation has limits.
This is not a normal industry.
NSE and BSE are a duopoly.
They function more like toll collectors of the financial markets.
When the market grows, the exchange with more traffic — NSE — should capture a disproportionate share of that growth.


Another factor could be public–private market arbitrage.
BSE trades in public markets where liquidity, sentiment, and daily flows can all influence valuation.
NSE trades privately, where pricing can become detached from public markets for several reasons:
• fewer transactions,
• negotiated deal sizes, and
• limited visibility on comparable multiples.

This can create a decoupling between the two valuations, even when the underlying fundamentals point in the opposite direction.

Put together, this can create a surprising outcome:
The stronger business ends up cheaper.
The weaker business ends up more expensive.