Indian capital market stocks have emerged as one of the strongest-performing pockets of the market over the past year.
The muted benchmark index performance has done nothing to limit the rally.
At the time of writing, while the Nifty 50 has declined by 5.66% over the last year, the Nifty Capital Market index surged nearly 39% in the same period.
Exchange operators, brokerages, and asset managers have led this outperformance.
Businesses that benefit from market participation.
Stocks such as BSE Ltd, Multi Commodity Exchange of India, Groww, Nippon India Life Asset Management, and Angel One have delivered strong returns ranging from 19% to as high as 173%.
The rally has come despite a challenging backdrop marked by volatile markets, slower earnings growth, and a noticeable moderation in retail trading activity.
Company1-Year Stock PerformanceBSE Ltd63%Multi Commodity Exchange of India173%Groww42%Nippon India Life Asset Management54%Angel One19%As of Friday, May 15.
A “pick-and-shovel” play on market participation
The outperformance of the capital market stocks is a “pick and shovel” play for the investors as the broader markets struggled.
These companies benefit from overall market activity, which insulate them from specific sectors.
This positioning has made them attractive in uncertain environments.
Harini Dedhia, Fund Manager and Director at Tamohara Investment Managers, explains the appeal as a hedge against uncertainty.
“It is almost a hedge against FOMO. If one is not convinced about individual stocks, or which sector/ pockets will do well, it makes sense to participate in capital market stocks- a leveraged way to play any up move in the market,” she told Invezz.
This dynamic has been particularly relevant over the past year, as broader markets struggled to maintain direction.
Investors have bet on intermediaries that earn from trading volumes, asset flows, and participation trends.
Strong earnings momentum in exchanges
Multi Commodity Exchange of India has been one of the standout performers, with its stock rising 173% over the past year.
The company’s financial performance reflects a sharp improvement in trading activity.
In Q4 FY26, MCX reported net profit of Rs 530 crore, more than doubling from Rs 135 crore a year earlier. Revenue also surged to Rs 889 crore from Rs 291 crore.
BSE Ltd has also delivered strong gains, with its stock rising 63% over the past year.
Its Q4FY26 Revenue increased to Rs 1,564 crore from Rs 847 crore, while net profit jumped to Rs 795 crore from Rs 494 crore.
Retail participation slows
Despite strong capital market company performance, retail trading activity has slowed down over the last year.
Active client accounts on the National Stock Exchange declined 7% year-on-year to 4.57 crore in March 2026, down from 4.92 crore a year earlier.
That is a drop of nearly 35 lakh accounts, showing a participation slowdown.
New account additions have failed to offset churn in accounts.
However, this slowdown has not been uniform across players.
Groww has increased its market share to 28.31% from 26.26%, leading industry additions in the March quarter.
The platform contributed more than 100% of net additions in January and maintained strong momentum through February and March.
Cyclical nature of retail trading
Experts broadly agree that the decline in retail activity is cyclical rather than structural.
Dedhia describes retail trading as “a high beta bet on the market,” noting that participation tends to rise and fall with sentiment.
She adds that if “animal spirits” return and sustain for a few months, volumes are likely to pick up again.
Chandraprakash Padiyar, Senior Fund Manager, Tata Asset Management, attributes the recent slowdown to a combination of weaker sentiment, slower corporate earnings growth, and regulatory tightening.
“Volumes are a function of corporate earnings growth, market liquidity driven by sentiment, and valuations. Over the past 12-18 months, corporate earnings growth slowed down post a very strong period of high growth consistently between FY2021 and FY2024.
Since 2025, sentiment has been weaker, along with some regulatory tightening in terms of higher STT and F&O norms. We believe a mix of all of the above factors has led to slower retail volumes,” he added.
However, he believes improving earnings prospects and more supportive monetary conditions could revive participation.
Commodities and diversification boost earnings
One of the key drivers of recent earnings growth has been increased activity in commodities markets, particularly gold and crude oil.
Padiyar said increased trading activity due to high commodity prices of gold and crude has played a role in the fundamentals of certain capital market companies.
Dedhia also noted the same.
“Commodities ADTO for the online brokers has seen 50-70% growth q-o-q. That, along with the adoption of wealth management by digital-first broking platforms, has helped earnings this past quarter,” she added.
AMCs have done better than most other equity-only players because of their multi-asset approach. Precious metal ETFs and their presence in multi-asset, plus SIPs at lower levels in midcaps and small caps, have aided their performance
Harini Dedhia
Fund Manager and Director at Tamohara Investment Managers
Regulatory changes: headwind or minor impact?
Recent regulatory changes, including tighter norms in the futures and options (F&O) segment and higher transaction taxes, have had some impact on trading volumes.
In the 2026 Union Budget, the Indian government raised taxes on equity derivatives to curb the retail frenzy in the derivatives market.
However, experts suggest that market conditions play a much larger role.
Dedhia emphasizes that stagnant markets pose a bigger risk to earnings than regulatory tweaks, while Padiyar notes that such changes tend to have a more pronounced effect during weak or range-bound markets.
Since 2025, market sentiment is weak on the back of slower corporate earnings growth, which in our view was temporary and due to cyclical reasons. Select policies to curb excessive speculation, like STT, F&O norms, did have a short-term bearing on volumes in a weak or consolidating market. Ultimately, volumes depend on sentiment and money-making opportunities in the market. Regulatory changes does tend to impact volumes in a weak market.
Chandraprakash Padiyar
Senior Fund Manager, Tata Asset Management
Key risks to the rally
Despite strong performance, risks remain for capital market stocks.
The most significant risk, according to Dedhia, is a prolonged period of stagnant or range-bound markets.
“A market that doesn’t have any direction- up or down. Constantly choppy and range-bound. That is the single biggest risk. Any significant adverse tinkering on capital gains taxation could be another,” she added.
Padiyar highlights valuations as another concern. He cautions that during periods of optimism, investors may overestimate growth prospects, leading to elevated valuations.
“Capital Market stocks tend to be cyclical in nature and move with the markets. These businesses are people-led and have high fixed costs. Any volatility in revenue can lead to sharp movements in profitability,” he noted.
Can the outperformance continue?
The outlook for capital market stocks over the next 2–3 years remains tied to broader market conditions and earnings growth.
Dedhia maintains a constructive long-term view, pointing to the ongoing financialisation of savings in India as a key structural driver.
“I cannot comment on prices in the near term, I do believe these businesses have a very long runway for growth.”
Padiyar also sees potential for sustained growth, provided corporate earnings recover as expected.
He notes that improving macro conditions, including supportive monetary policy and better nominal GDP growth, could help revive sentiment and trading volumes.
However, he added that “barring a few, most capital market-related businesses do have a good earnings growth assumption being built into the stock prices over the next 2-3 year horizon. We need to monitor actuals against expectations for stock performance to sustain.”
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