NSE IPO 2026: Delhi HC clears hurdle, SEBI next

Market mood stays cautious despite rebound

Indian markets recovered around 200 points from the day’s low, but sentiment remained guarded as uncertainty around the Iran-US ceasefire continued. The rebound suggested bargain buying and short covering, yet traders stayed cautious about global headlines. Against that backdrop, attention in domestic capital markets shifted to a set of regulatory and legal developments around derivatives and market infrastructure.

Two threads dominated: the National Stock Exchange of India’s long-pending IPO process and the regulator’s continued focus on curbing excessive speculation in equity derivatives. Comments from NSE leadership and SEBI’s top management also pointed to a broader policy direction, where the growth of derivatives is being balanced with stronger investor safeguards.

Ashish Chauhan flags the rising role of derivatives

At an FIA conference in Mumbai, Ashish Chauhan, MD and CEO of NSE, said rapid technological, geopolitical and financial shifts are likely to increase the importance of derivatives as risk management tools in the coming decades. His remarks positioned derivatives not just as trading instruments but as tools that can help market participants manage uncertainty.

But Chauhan also warned that a developing economy like India cannot afford excessive speculation, particularly by economically weaker sections. His emphasis was on the social and systemic costs of over-leveraged participation. The message aligned with SEBI’s recent steps to restrain ultra-short-term speculation in index derivatives.

Call for tighter entry norms for derivatives trading

Chauhan advocated tighter regulations and minimum qualifying criteria for derivatives trading, pointing to frameworks in Singapore and the United States. The argument was straightforward: participation should be better aligned with risk capacity and financial sophistication.

He also said stricter SEBI norms for retail investors in derivatives have reduced participation by 30% to 40% over the past year. Chauhan quantified the shift in activity, stating that nearly 5.5 million people traded in derivatives in June last year, which has declined to around 2.5 to 3 million. He linked the decline to higher margins, larger lot sizes and tighter calculation rules introduced to curb overtrading.

Delhi High Court dismissal clears a legal hurdle

News reports said the Delhi High Court dismissed a petition challenging the no objection certificate (NOC) granted by SEBI to NSE for its IPO. The dismissal removes a judicial challenge to SEBI’s approval and clears a legal hurdle in NSE’s listing process.

With the petition dismissed, NSE can proceed with preparatory steps for its proposed public issue. While the ruling does not complete the IPO process by itself, it reduces uncertainty around a specific legal challenge and supports the exchange’s ability to move forward on procedural work.

What the petition alleged about corporate action adjustments

The petitioner challenged SEBI’s corporate action adjustment framework, which aims to maintain economic neutrality in derivatives contracts during events such as bonus issues, stock splits and special dividends. According to the plea, NSE allegedly adjusted only contract prices without modifying quantities and debited dividend-equivalent amounts from derivatives traders’ accounts.

The petition argued that dividends accrue solely to shareholders under the Securities Contracts Regulation Act and claimed recoveries from derivatives participants lacked statutory backing. The High Court dismissal means this line of challenge will not block NSE’s next steps linked to the IPO NOC.

NSE IPO: a process delayed since 2016

NSE first filed draft IPO papers in October 2016. The process stalled due to governance concerns, including the co-location case involving preferential server access and issues related to technology systems and internal controls. These governance questions have remained central to the timeline for India’s most anticipated exchange listing.

In a separate update, Chauhan said NSE would begin work on the IPO only after receiving an NOC from SEBI, adding that the exchange had not initiated even the first step and would start preparing the draft red herring prospectus only after the NOC. His comments came amid reports that NSE had restarted IPO plans and applied for an NOC, but concerns flagged by SEBI reportedly led to a pause.

SEBI pauses NCDEX and MSE plans in equity options

SEBI has paused the entry of NCDEX and Metropolitan Stock Exchange (MSE) into the equity derivatives (options) segment. The regulator advised both exchanges to first strengthen their share-trading businesses before expanding into new derivative products.

The move underlined SEBI’s cautious approach toward India’s fast-growing derivatives market. In effect, the regulator signalled that product expansion should follow robust cash-market capabilities, market surveillance readiness, and stable operations.

SEBI chief Pandey signals more market-structure directions

SEBI chief Tuhin Kanta Pandey said the watchdog is exploring a regulated platform for pre-IPO trading, which could eventually replace unregulated grey market deals. He also flagged challenges such as unnecessary processes, disclosure requirements, fundraising frictions and onboarding issues.

On derivatives, Pandey said SEBI is considering ways to extend the tenure and maturity of equity derivative contracts in a calibrated manner, following SEBI’s study that showed 91% of individual F&O traders lost money in FY25, with collective losses of over ₹100,000 crore. He warned against an unhealthy tilt toward ultra-short-term contracts and said the regulator would consult stakeholders to improve maturity so products better serve hedging and long-term investing.

NSE earnings show the cost of derivatives tightening

NSE’s recent financial performance reflects regulatory headwinds. SEBI’s November 2024 clampdown on equity derivatives, including the ban on multiple weekly contracts aimed at curbing excessive speculation, hurt volumes and exchange revenues.

The September quarter numbers shared in the inputs showed consolidated profit after tax (PAT) declined 33% year-on-year and revenue from operations declined 18% year-on-year, with the primary impact attributed to derivatives regulation. Separately, NSE’s results were discussed with references to exceptional items, including a one-time charge linked to the legacy co-location and dark fiber matter from 2015-16.

When exceptional items were excluded in the numbers cited, normalized core PAT was about ₹5,092 crore, down 11% from ₹5,704 crore. Volumes were reported to be down 26% to 30% across segments, with no immediate signs of recovery mentioned in the provided inputs.

Key numbers at a glance

How exchange competition and regulation shape the story

NSE operates in a near-duopoly alongside BSE, supported by high entry barriers such as technology requirements, regulatory oversight, and liquidity needs. Yet the regulator’s posture indicates that derivatives growth will be closely managed, especially when retail participation and losses remain a concern.

A note referenced in the inputs said that despite SEBI’s ongoing clampdown on index derivatives, market activity showed resilience in August and early September as traders and institutions adjusted. At the same time, the strength in derivatives was described as carrying risks, including the possibility of further tightening due to concerns around rising retail losses.

What to watch next for NSE’s IPO and derivatives rules

Pandey told reporters SEBI expects to clear pending issues surrounding NSE’s IPO and said all outstanding issues would be resolved shortly. He also said SEBI has concluded internal committee deliberations on standardising equity derivatives expiry dates, with a formal clarification expected before the end of the month. The consultation paper had recommended that all equity derivatives expire uniformly on either Tuesdays or Thursdays across exchanges to optimise spacing and improve market efficiency.

On the operational front, Chauhan said SEBI’s decision allowed NSE to settle derivatives contracts on Tuesdays and BSE on Thursdays, noting NSE initially chose Monday but later selected Tuesday from options provided.

Conclusion

A Delhi High Court dismissal has removed a legal obstacle tied to SEBI’s NOC for NSE’s IPO, keeping the long-delayed listing on track for further preparatory steps. At the same time, both NSE leadership and SEBI’s top management have reinforced that derivatives will remain central to risk management, but under tighter guardrails aimed at limiting speculative excess and protecting retail participants. Near-term attention is likely to remain on SEBI’s promised clarification on expiry schedules before month-end and on the regulator’s timeline for resolving outstanding IPO-related issues.