Shares of BSE climbed nearly 10 per cent in Thursday's trade, even as measures by the markets regulator SEBI to tame retail F&O speculation are seen hitting volumes at the stock exchange. With the announcement, a couple of brokerages felt the F&O hangover is behind the stock, and that BSE still got several catalysts that may help it offset the impact and sustain its premium valuations.
IIFL Securities said NSE’s Option premium turnover could get impacted upto 40 per cent; while that of BSE by 20 per cent. That said, the impact on earnings would be lower, given the recent tariff increase. The domestic brokerage sees 20 per cent impact for NSE and only 5 per cent impact for BSE on FY26ii EPS (full year impact).
"On revised earnings, BSE trades at 42 times FY26ii EPS – but given the potential for earnings upgrade (25-30 per cent driven by further tariff hike + faster market-share gains) we believe premium valuations would sustain. With the key overhang behind and scope for further penetration (currently only 30mn investors trade in cash market and 10m in Equity derivatives) the long term growth potential remains intact," it said.
For BSE earnings, the hit would be miniscule even if the derivative volumes decline by 20 per cent instead of a 22 per cent increase built in the forecast, MOFSL said. This is if the premium to notional turnover ratio increases from 0.072 per cent to 0.09 per cent. MOFSL maintained its 'Neutral' rating on BSE.
IIFL Securities said it continued to remain positive on both stock exchanges and would recommend to add BSE if there is price correction. The BSE stock rose 9.74 per cent to hit a high of Rs 4,235 on BSE.
The brokerage noted that BSE has fixed Rs 3,250 per crore of premium turnover – which is 7 per cent higher than it FY26ii assumption. "Note that BSE tariff is 7 per cent lower than NSE, and to that extent it has headroom to further increase tariff and mitigate the earnings risk," IIFL Securities said.
BSE has scaled up its derivatives market share to 27 per cent in terms of turnover and 13.3 per cent in terms of premium turnover in September. This has been on the back of product innovation wherein they launched the expiries on different days vs the existing products of NSE. Large market share for BSE arises out of Sensex rather than Bankex, MOFSL said.
"With now only one benchmark index will be available for launch of weekly expiry, NSE/BSE will continue with Nifty/Sensex. Earlier since NSE had an expiry on all days except Friday, BSE found it difficult to scale up volumes. Nevertheless, BSE will now have three more days to compete against NSE. Product innovation could be an alternative wherein new contracts can be launched on new indices with monthly expiries in different weeks. For BSE, since large volumes were happening on expiry day, its premium to notional turnover ratio was at 0.07 per cent against 0.16 per cent for NSE (Sep’24)," MOFSL said.