India's Biggest Opportunity: Capital Market Stocks - Top 3 Stocks you can't ignore - Rahul Jain – Transcript

00:00Hi friends, my name is Rahul Jain. I'm a SEBI registered research analyst. Recently, you might have seen an advertisement of new fund offer by Axis Mutual Fund House launching an index fund on capital market theme. Now, the reason I'm showing you this is because if you ask me that Rahul, which is that one theme that I am bullish about for 2040, then I would say capital market theme. Why am I saying that? Three big reasons for this. Allow me 1 minute of

00:26time so that you understand data backed analysis. Now, the first reason is the transactions that are happening in Indian stock market. For example, if you look at since FY16, equity volume has grown at around 23% CAGR basis. And forget about equity volume, look at the derivative volume, which is F&O. It has grown at around 67% CAGR basis since FY16. And see these tall buildings for FY24-25, huge growth in F&O volumes. Now, the

00:54million-dollar question is can this trend really continue and sustain? Absolutely possible. Why? Because if at the equity as a percentage of household assets, in India, it is still very low at around 6% only. Compare this with USA, where it is around 22%. So, there is still a lot of room for growth coming in terms of the volume of Indian stock market. And the direct beneficiary of growing volume in Indian stock market will be who? Your brokerages, your

01:21exchanges, your depositories, your AMC business. In fact, I'm going to show you in this video three stocks, and I will talk about the impact of transaction volume into the profits of these companies. Extremely important data point that you would not find anywhere.

01:35Now, the second important reason that we need to understand is the growth of demat account. If you look at my screen, you will see that in the last 5 to 6 years, the growth of new demat accounts has been around 33% CAGR basis. And yet, in India's population, only 13% as of FY25, only 13% people have demat account. So, still more More 80% people do not yet have demat account. Imagine when out of these 80% let's say even 50%

02:01people open demat account. The growth is huge in this particular segment for the next 15 to 20 years. Now the third reason is the growth of SIP. So have a look at my screen and you will see that since FY16-17 the growth rate of SIP contribution in Indian stock market has been around 26%.

02:20This is a huge growth that we have seen in SIP specially in FY25 and 26. Even though the SIP growth rate has been excellent, if we compare the AUM to GDP ratio in India versus advanced countries like US we still at only around 20% and in US this ratio is at around 124%.

02:39So there is still a lot of growth from a mutual fund SIPs perspective. Now I can continue to show you more data points but the point is very very simple that capital market theme for the next 20 years is likely to be a very strong tailwinded sector. Of course there will be some cyclicity built in it. Whenever the transactions drop on exchange there might be huge correction and those are the opportunities for people who want to sit and buy those opportunities that are for long term. As an investor I am

03:07absolutely bullish from a long term perspective and if you have not yet explored this particular segment I highly recommend that you go and explore this particular segment. Where do we start? So there are two ways. Number one is that you can go and invest in index mutual funds which are on capital market theme. So that you're not doing stock picking. You are just relying on that index. I'll speak about that in a minute. And the second approach is that you go and learn about individual stocks. So in this video I'll speak about three stocks as well so that you get a good insight and well rounded

03:35views in terms of your options. None of these are recommendations but I hope you're going to get a lot of insights from this video. This might be slightly longer video but guess what? This type of theme does need a lot of my time. Hope you like this video and if you're new to the channel please hit the subscribe button because your subscription motivates me and my team to do a lot of research for you at zero cost.

03:59With that, let me start with first option, which is index fund. So, there is an index called Nifty Capital Market Index. And if you look at the allocation in this particular index, you will see that exchange and data platform sort of stocks takes around 40% contribution as of now. And if you look at asset management companies like your mutual fund houses, around 23% stock broking, around 19.5% depository clearing house, etc. 13.5% and then there are financial product

04:25distributors making it 200%. If I talk about large cap, mid cap, small cap, then primarily it is mid cap driven, 54% small cap, 29% and large cap, 15.9%. What does this mean? That this index is likely to be very, very volatile, okay?

04:40Because high contribution of mid cap and small caps. So, these are not for conservative investors. If I look at the top 10 stocks as of now by weight, then BSE 19.8%, MCX 17%, HDFC AMC 13% and you can see all these allocations as of now, right? If I talk about the past performance, which is not guaranteeing the future performance, if you look at one year performance, three year performance, five year performance since 2019 when this index was created or

05:08benchmarked against, you will see that returns versus Nifty 500. So, 25.4% in last one year, 58% in last three years, 31.9% five year, 24.6% since 2019. These are annual returns and the data is as of 30th March 2026 when the stock market saw a huge correction because of the war situation. If I quickly speak about the SIP performance, not a great performance in last one year, okay? But three year and five year basis, very, very good

05:34performance. Again, these are not guaranteed performance for the future, but in the last three to five years, this segment has been really doing exceptionally well. And in my view, it is likely to do well if you're a long time investor for 5 years, 7 years, 10 years. So, if you do not understand how to go about picking these stocks, understanding the nuances, then in that case, you can go and explore capital market index. Okay. But now, let me speak about the direct stocks as well.

05:59I'll give you commentary about one of the exchanges. I will give you commentary about one of the brokers, and I will also give you commentary about one of the AMC's, so that you get a very rounded view in terms of what sort of growth we are getting in these three segments, so that you get a very, very holistic picture. With that, let me go to stock number one. Stock number one is BSE, Bombay Stock Exchange Limited. I'm going to talk about two very, very critical points about BSE Limited that you are not going to find anywhere else.

06:25Please pay attention for the next 3 to 4 minutes. Okay. First point, if you see these financial numbers for BSE, very, very interesting pattern you will see. Since COVID FY20, if we see top line growth around 34% CAGR basis, net profit growth at around 60% CAGR. And this is very consistent year-on-year. Okay, you see the graph here. Blue line is the revenue line, and the orange is the profit. Okay. Now, if you see the net

06:50profit margin in FY20 used to be around 14%. It's gone to around 48% in FY26, which is around 3.4 times growth. Okay. Now, the question is why such a growth in the net profit? So, please understand one thing. More and more transactions come on BSE platform, then their margins are likely to improve. Why? Because the fixed cost is a fixed cost, and their main money is being made from transactions. Let me show you that data point, and then we'll talk about the valuations, extremely critical point.

07:18So, first let me talk about the transaction volume. So, 73% of the top line comes from transaction charges. This is their main business. Okay. There are other businesses. I'm not going to go into details of it. Point you need to understand is that if in the Indian stock market, transactions continue to grow, their business is likely to grow because 73% of their top line is coming from transaction charges. Now, if I were to give you the breakdown of transaction charges as well, very, very important point, right? Equity cash versus F&O.

07:43So, equity cash is only contributing around 5% of their total revenue. So, that is not where their main business is. Their main business is coming from F&O, which is equity derivatives. Around 60% of their top line is coming from derivatives, futures and options. This is where the money is lying. Now, a lot of who-ha happened around STT charges being impacted from 1st of April, etc.

08:04Now, the management clear-cut said that option STT, there is not likely to be any impact, okay? Futures, they said that we need to be watchful about it. And here is the latest data for you. In the month of April, 1st of April, the STT increase was impacted, right? Now, if you look at the volume, what happened to the volume? In fact, in BSE, the volume was higher as compared to NSE.

08:26Even though the STT has been increased, the F&O volume have gone up. The market share of BSE temporarily have gone higher than NSE. Of course, there are some nuances around, you know, whether this is due to the volume or the pricing, etc. But, main point you need to understand is that although the STT increase has taken effect from 1st of April, BSE has not lost the market share. In fact, the market share has gone up. And also, if you look at the strategic cost advantage that BSE has,

08:53BSE's charges are much lower than NSE. So, this is where we stand in terms of the transaction volume, charges, and the growth that we have seen in BSE. More importantly, if we talk about management's vision, they're likely to introduce at some point in time commodity trading as well. Also, stock options as well, which are ESOPs, etc.

09:12So, a lot of room to grow for the transactions. And you know what? Anyways, the demat account penetration, the overall contribution from Indian population to transactions is likely to grow if you look at long term. If you think 2040, then the transactions that we're seeing right now, they are likely to grow manifold. I don't know how much.

09:29I don't have any estimation. But, the company is going to go and enjoy that sort of premium because of these volumes. Now comes the second critical point about BSE, which is the valuation. So, if you look at the last 3 years PE ratio, because maximum growth has come in last 3 years. So, we have to look at PE ratio from last 3 years perspective.

09:46It is trading right now at around, let's say, 63. Now, the median PE has been around 69. In my view, very good place to be is at around 50 PE. So, somewhere here, 50 PE, 52 PE, these are very, very good levels given the growth prospect of BSE for the long-term perspective. Why do I say 50 PE is very, very important PE ratio?

10:06Because if you look at NSE, that is where the main competition is coming from, which is in the unlisted space right now. Okay, it's not yet listed. Listing timelines are on your screen. There is a chance that it might get listed by Q3. Okay, we don't know exact timelines, they might vary, but NSE will get listed at some point in time. And if you look at the current valuations of NSE in the unlisted market, it trades at around 40 PE. The moment NSE list, there might be some temporary setback for BSE

10:32because there will be two exchanges competing for the investors' attention. But as of now, if you ask me, the PE ratio is slightly on the higher side, 63. I don't know when you're watching this video, but to me, at around 50 PE, BSE will make a lot of sense given the growth prospect of this particular company. This is what my analysis is on BSE, very, very good company, growing company. And time to time when SEBI will intervene in terms of the volume or the prices or changes in F&O, you will see

11:00pressure on this particular company. Those will be the opportunities in my view. That's the stock number one, which is BSE. Now, let me go to the second company, which is on the broking side of the business. But before that, so far if you're liking this video, request you to hit the like button, subscribe to my channel because your subscriptions will motivate me to continue to bring solid content for you at zero cost. Also, if you want to learn practically, you can join my exclusive community on YouTube where almost on daily basis I'm sharing

11:26insights like these so that you become an informed and educated investor about stock market investing. Feedback of this community has been excellent. Simply go to my channel, hit the subscribe button, and then find the join button and be my guest. With that, let's go to stock number two now. The name of the stock is Grow, which got listed in November 2025.