Axis Capital has initiated coverage on India’s capital market infrastructure space, highlighting strong earnings visibility, structural growth drivers, and improving valuations across key players including registrars and transfer agents (RTAs) and depositories.
In its latest note, the brokerage said market infrastructure and utility players offer a compelling play on India’s capital markets, supported by stable growth, high entry barriers, strong operating leverage, and emerging business opportunities.
Axis Capital has initiated with a ‘buy’ rating on KFin Technologies and Computer Age Management Services (CAMS), while assigning an ‘add’ rating to Central Depository Services (CDSL) and National Securities Depository Ltd (NSDL).
The brokerage has set target prices of ₹1,200 for KFin, ₹850 for CAMS, ₹1,425 for CDSL, and ₹1,000 for NSDL.
The report notes that exchanges, depositories, and RTAs benefit from India’s expanding capital market ecosystem, with increasing retail participation, rising mutual fund penetration, and long-term nominal GDP growth supporting transaction volumes.
Axis Capital expects earnings growth of 15–22% CAGR for depositories and RTAs over FY26–FY28, driven by diversified revenue streams and operating leverage in low-cost models.
The brokerage highlighted that depositories such as CDSL and NSDL are seeing stable revenue growth increasingly driven by transaction-based and issuer-led income streams, rather than solely demat account additions. CDSL, in particular, has outperformed NSDL in recent years, aided by strong retail market share gains.
Meanwhile, RTAs are seen as better positioned within the capital market infrastructure space, given their lower regulatory risks and more stable business models. KFin is expected to benefit from strong international growth and increasing assets under management (AUM) from mutual fund clients, while CAMS is likely to maintain stability through its dominant domestic presence and growing non-mutual fund businesses.
On valuations, Axis Capital noted that stocks in the space have corrected in recent months due to moderation in growth expectations and regulatory concerns. However, this has made valuations more attractive, with RTAs and depositories now trading at lower forward multiples compared to historical averages.
The brokerage believes earnings growth visibility has stabilised and expects the sector to deliver consistent compounding over the medium term, supported by structural tailwinds and operating efficiency gains.
Overall, Axis Capital remains constructive on the capital market infrastructure theme, preferring RTAs over depositories due to better earnings visibility, lower regulatory risks, and favourable risk-reward at current valuations.