Shares of BSE Ltd. experienced a notable decline on Thursday, falling over 2% to a day's low of Rs 3,280. The drop followed a Bloomberg report indicating that the National Stock Exchange of India Ltd. (NSE) is considering a strategy to enable its shares to trade on its own platform, even after formally listing them on rival BSE. This development, coupled with recent downgrades from prominent brokerages, contributed to investor apprehension.
NSE's Listing Strategy Impacts BSE
According to the Bloomberg report, which cited sources familiar with the discussions, NSE's shares would undergo formal listing on the BSE. However, the proposal suggests they could simultaneously trade on the NSE under a 'permitted to trade' category. This move would require official approval from the Securities and Exchange Board of India (SEBI).
The 'Permitted to Trade' Framework
The 'permitted to trade' framework allows securities to be exchanged on the NSE without a formal listing on that particular exchange. Their compliance and disclosure obligations remain consistent. In 2019, NSE revised its index eligibility rules, enabling such securities to qualify for inclusion in Nifty indexes, a privilege previously reserved for formally listed shares. Currently, approximately 250 companies not formally listed on the NSE utilize this framework.
The Bloomberg report also indicated that NSE anticipates receiving SEBI's approval for its draft prospectus by the end of August, with an initial public offering (IPO) launch targeted for the latter half of September.
Brokerage Outlook and Long-Term View
The recent market developments have prompted caution among several global and domestic brokerages regarding BSE's stock.
Why Brokerages Are Cautious
- Jefferies: The global brokerage downgraded BSE to 'Underperform'. Concerns included the impact of the closing auction session (CAS), a higher securities transaction tax, and revised bank-guarantee norms from the Reserve Bank of India (RBI).
- Nuvama Institutional Equities: This domestic brokerage also downgraded BSE from 'Buy' to 'Hold', revising its target price to Rs 3,240. Factors cited included the effect of CAS on options volumes, tighter bank-guarantee regulations, and a perceived saturation in market-share gains for BSE.
Despite these immediate concerns, market expert Avinash Gorakshkar expressed a positive long-term outlook for BSE. He acknowledged that short-term changes in the Futures & Options (F&O) segment would likely impact volumes. However, Gorakshkar highlighted the anticipated NSE IPO, expected to list on BSE in September, as a significant upcoming event. He believes this listing will generate substantial volume activity on BSE, reinforcing its position as a long-term structural investment story.