Groww and Zerodha's Kamath Brothers Just Bet ₹1,240 Crore on MSEI — But Can It Survive Against NSE's 90% Market Stranglehold?
KEY FACTS AT A GLANCE: MSEI raised ₹1,240 crore in two tranches — ₹238 crore from Groww (Billionbrains Garage Ventures) and Zerodha (Rainmatter) in December 2024, followed by ₹1,000 crore from Peak XV Partners and others in July 2025. The exchange officially resumed live trading on January 27, 2026, starting with 130 stocks. NSE currently controls 90–92% of India’s cash segment and ~95% of F&O volumes.
When India’s two most disruptive fintech forces — Groww, the country’s largest brokerage by active clients, and Zerodha, its most profitable — both write large cheques for the same struggling stock exchange, the market pays attention. In December 2024, Billionbrains Garage Ventures (Groww’s promoter entity) and Rainmatter Investments (Zerodha’s investment arm, led by the Kamath brothers) jointly participated in a ₹238 crore private placement in the Metropolitan Stock Exchange of India, better known as MSEI. That was only the beginning.
By July 2025, MSEI had secured a fresh ₹1,000 crore round from Peak XV Partners (formerly Sequoia India), Trust Investment Advisors, Pharma Ventures, and a clutch of broking houses, bringing its cumulative capital infusion to ₹1,240 crore. Then, on January 27, 2026, after years of near-dormancy, MSEI switched on its live trading systems for 130 stocks and opened a special session on February 1, 2026, Budget Day. India officially has a third national stock exchange again.
But the question that every market participant is asking is blunt: can MSEI genuinely challenge the NSE-BSE duopoly, or is this ₹1,240 crore bet simply too late — and too small — to matter?
What Is MSEI and Why Has It Struggled for Nearly Two Decades?
MSEI was founded in 2008 under the name MCX Stock Exchange (MCX-SX), backed originally by the Multi Commodity Exchange. It received a full SEBI license to operate in equity, equity derivatives, currency derivatives, interest rate futures, debt instruments, and SME listings. On paper, it was a fully-formed rival to NSE and BSE. In practice, it never attracted the one thing an exchange cannot survive without: meaningful trading volume.
The core problem was a chicken-and-egg trap that almost every challenger exchange faces. Traders need liquidity to execute orders efficiently. Liquidity only builds when enough traders are already present. Since NSE had already cornered the market with deep order books and tight bid-ask spreads, most retail and institutional traders had no rational reason to shift platforms. MSEI’s trading screens sat largely empty, and the exchange quietly faded into the background through the 2010s and most of the 2020s.
Revenue tells the full story of that decline. MSEI reported total revenue of approximately ₹17.4 crore for FY2025, compared to ₹9 crore in FY2023 — itself a number so small it barely registers against NSE’s multi-thousand-crore revenues. The exchange reported net losses for multiple consecutive years, with an EPS in negative territory. Book value per share remains below ₹1. This is not the financial profile of a competitor. It is the profile of a company on life support.
The Scale of the Challenge: NSE-BSE Market Dominance
Before assessing MSEI’s chances, it is essential to understand just how dominant the incumbents are. The following data from SEBI and exchange reports as of early 2026 illustrates the mountain MSEI must climb.
| Segment | NSE Share | BSE Share | MSEI Share |
| Cash Equities | 90–92% | 8–10% | 0% |
| Futures & Options (F&O) | 95% | 5% | 0% |
| Index F&O | 80% | 20% | 0% |
| Currency Derivatives | Dominant | Active | Minimal |
| SME Listings | NSE Emerge | BSE SME | None active |
Source: SEBI data, Outlook Money, industry reports (January 2026)
These numbers make clear that this is not a two-horse race where MSEI has a foothold. It is a race where two horses have crossed the finish line multiple times over, and MSEI is still warming up at the starting gate. NSE’s 95% grip on F&O — the segment that generates the bulk of exchange revenue in India — is particularly formidable.
Why Did Groww and Zerodha Invest Anyway?
The motivations behind Groww and Zerodha’s investments are more strategic than sentimental. Both companies are large brokerages whose business model depends directly on exchange fees, derivative products, and the structure of India’s trading infrastructure. When SEBI restricted weekly expiry contracts to just two days per week (Tuesdays and Thursdays) effective September 2025, it dramatically curtailed NSE’s weekly F&O product range. This created a regulatory opening that didn’t exist before.
MSEI’s flagship index, the SX40, could potentially launch its own weekly expiry contracts on different days than NSE or BSE, giving traders additional hedging windows without cannibalising the incumbents directly. Groww and Zerodha, as exchange members, would benefit from routing order flow to a lower-cost platform. MSEI charges among the lowest transaction fees of any SEBI-recognised exchange, and for brokerages executing millions of trades daily, even small per-trade savings compound into significant annual cost reduction.
The Kamath brothers have also historically positioned Zerodha through Rainmatter as a capital markets infrastructure investor — backing companies that reshape how Indian investors access markets. An MSEI investment fits neatly into that thesis. Similarly, Groww’s participation signals confidence that India’s rapidly expanding retail investor base — which has grown from under 40 million demat accounts in 2020 to over 185 million by 2026 — will eventually support a multi-exchange ecosystem.
EXPERT VIEW: “For brokerages like Groww and Zerodha, investing in MSEI is partly financial and partly strategic. A competitive third exchange keeps transaction costs honest across the ecosystem and creates optionality for future product launches that aren’t constrained by NSE’s pricing power.” — DailyFinancial.in Market Desk Analysis
What MSEI Is Actually Doing With ₹1,240 Crore
The fresh capital is being deployed across three priority areas that MSEI has publicly outlined. First, technology infrastructure: the exchange upgraded its mandatory trading software to Version 25.0.0, launched a Liquidity Enhancement Scheme (LES) in January 2026, and brought its key indices, SX40 and SXBANK, live with real-time OHLC data. Second, liquidity management: MSEI has engaged market makers to support approximately 130 equity stocks, using SEBI-approved LES frameworks to incentivise participation until organic liquidity builds.
Third, product differentiation: MSEI is actively exploring Carbon Credit Trading under India’s Carbon Credit Trading Scheme (CCTS), where it hopes to secure early-mover advantage. NSE and BSE are also expected to enter this space, but MSEI’s smaller size and greater agility could allow faster product rollout. Additionally, the exchange is considering micro F&O contracts and ESG-focused indices aimed at retail and millennial investors who are underserved by NSE’s large contract sizes.
| Funding Round | Amount | Key Investors | Timeline |
| Private Placement | ₹238 Crore | Groww (Billionbrains), Zerodha (Rainmatter), Share India, Securocorp | December 2024 |
| Second Round | ₹1,000 Crore | Peak XV Partners, Trust Investment Advisors, Pharma Ventures, broking firms | July 2025 |
| Total Capital Raised | ₹1,240 Crore | Combined investor base across two tranches | 2024–25 |
Source: Business Standard, MSEI exchange filings, Moneycontrol (2024–25)
The Brutal Reality: What MSEI Must Overcome
Despite the optimism of its backers, MSEI faces structural challenges that no amount of capital alone can solve quickly. The first is the liquidity trap. On its opening days of trading from January 27, 2026, total traded value across the exchange stood at roughly ₹4 lakh. That figure, while symbolically important as proof of life, is orders of magnitude below the ₹1 lakh crore that NSE regularly clears in a single session. Derivatives segments, which represent the bulk of exchange revenue, showed zero activity in MSEI’s early days.
The second challenge is habitual loyalty. India’s retail trading community has built its workflows, APIs, charting systems, and strategies around NSE data and order books. Migration requires compelling incentives — lower fees alone are rarely enough if counterparty risk or execution slippage increases. The third challenge is regulatory. SEBI’s restriction on weekly expiry days means MSEI cannot simply copy NSE’s derivative product playbook. It must innovate, and innovation in regulated exchange products requires time, compliance review, and market education.
There is also the historical shadow. MSEI has promised revivals before, and the market has been disappointed. The MSEI unlisted share price tells this story vividly: it surged to nearly ₹12–13 per share in December 2024 on excitement about weekly expiries, then collapsed 65% by mid-2025 when SEBI’s expiry restrictions made that thesis less viable. As of March 4, 2026, MSEI unlisted shares trade in the ₹4.55–5.25 range. Market memory is long, and credibility must be rebuilt trade by trade.
⚠️ RISK ALERT: MSEI unlisted shares are speculative investments with persistent losses, negative EPS, and book value below ₹1 per share. The 6-month lock-in period and absence of a confirmed IPO timeline add liquidity risk. This article is for informational purposes only and does not constitute investment advice.
Three Scenarios for MSEI’s Future
Looking beyond the immediate launch period, MSEI’s trajectory will likely follow one of three paths, each with distinct implications for the Indian capital markets ecosystem.
Scenario 1: The Niche Exchange
MSEI does not need to dethrone NSE to be commercially viable. If it captures even 5–10% of India’s currency derivatives market, establishes a credible carbon credit trading platform, and becomes the go-to venue for SME listings outside Mumbai’s traditional ecosystem, it could build a sustainable revenue model. This is the most realistic near-term outcome if management executes well.
Scenario 2: The Regulatory Beneficiary
SEBI has historically supported market competition, and further regulatory changes — such as new product categories, mandatory order routing requirements, or exchange interoperability rules — could meaningfully shift volumes to MSEI. If SEBI designates specific expiry windows exclusively for new entrants, MSEI’s SX40 futures and options could attract genuine institutional flow.
Scenario 3: The Consolidation Target
Global exchanges have long used acquisitions to grow. MSEI, with its SEBI licence, infrastructure, clearing corporation (MCCIL), and blue-chip shareholder base including SBI, HDFC Bank, Axis Bank, and Bank of Baroda alongside Groww and Zerodha, is a credible acquisition target for a global exchange operator or a domestic financial conglomerate seeking a regulated exchange platform. This scenario would represent a different kind of success — one measured in deal value rather than trading volumes.
✅ WHAT TO WATCH: Monitor MSEI’s monthly traded volume data on its official website (msei.in), SEBI circulars on exchange competition policy, any MSEI IPO announcement, and whether its SX40 derivatives segment shows activity by Q2 2026. These will be the clearest early indicators of which scenario is unfolding.
What This Means for Indian Retail Investors
For the average investor trading on Zerodha or Groww, MSEI’s relaunch has immediate practical relevance. Both brokerages are now exchange members of MSEI, which means their platforms could offer MSEI-listed instruments alongside NSE and BSE options. This could eventually translate into additional hedging instruments on different expiry days, access to carbon credit derivatives as that market develops, and potentially lower transaction costs on specific products where MSEI builds genuine liquidity.
However, retail investors should resist the temptation to read the Groww-Zerodha investment as a straightforward endorsement. Both companies invested at ₹2 per share (face value ₹1 + ₹1 premium), and the current unlisted market price of ₹4.55–5.25 reflects speculative optimism rather than fundamental value. MSEI has not reported a profit in recent years and its revenue remains a fraction of what would justify current unlisted valuations.
Competition in India’s exchange sector is unambiguously good for the long-term health of capital markets. It constrains transaction fees, forces technology investment, and creates product diversity. Whether MSEI is the vehicle through which that competition manifests — or whether it becomes another footnote in India’s financial history — will be determined by execution quality, regulatory support, and the patience of its investors over the next 24 to 36 months.
Verdict: A Credible Bet, But Not a Sure One
The ₹1,240 crore raised by MSEI is the most serious capital commitment the exchange has ever secured, backed by names that command genuine respect in India’s financial ecosystem. Groww, Zerodha, and Peak XV do not write large cheques carelessly. The January 2026 trading launch, while modest in volumes, proves that MSEI is operational and not merely a listing on an unlisted shares website.
But the gap between operational and competitive remains enormous. NSE’s 95% F&O dominance is not a number that yields to optimism or press releases. It yields to volume, liquidity, and trader habit — all of which take years to build. India’s capital markets are better served by a credible third exchange, and MSEI has the best shot in its 17-year history at becoming one. Whether ₹1,240 crore is enough to close that gap, the market will decide — one trade at a time.
DISCLAIMER:
This article is published for informational and educational purposes only. All data sourced from SEBI filings, Business Standard, Outlook Money, Moneycontrol, Stockify, and public exchange disclosures as of March 2026. MSEI unlisted share prices are volatile and reflect grey market sentiment, not SEBI-regulated valuations. This is not investment advice. Readers should consult a SEBI-registered investment advisor before making any financial decisions. DailyFinancial.in holds no position in MSEI or any entity mentioned herein.
