BSE Ltd. saw its shares rally by 4% in Monday's trading session after MOFSL (Motilal Oswal Financial Services) upgraded the stock from 'Neutral' to a 'Buy' rating. The domestic brokerage also significantly raised its target price for the exchange operator to Rs 4,000, up from the previous Rs 3,480, reflecting increased confidence in its future performance.
Strong Volume Growth and Market Share Gains Fuel Optimism
MOFSL's optimistic outlook for BSE is primarily driven by a robust volume run-rate and a notable improvement in its cash market share, which has grown from 7% to 9%. The brokerage anticipates further catalysts from NSE's listing and the expiry of a lock-in period in March 2027. Additionally, the potential reversal of the Closing Auction Session (CAS) is expected to benefit BSE's trading volumes. The report also highlights that every incremental rupee of BSE's revenue has the potential to translate into healthy profit growth, partly due to the variable nature of regulatory costs.
The exchange's cash average daily turnover (ADTO) is projected to achieve a 30% Compound Annual Growth Rate (CAGR) between FY26 and FY28. MOFSL also pointed to 'Star MF' and co-location services as scalable and diversified earnings streams that will contribute to BSE's financial health.
Derivatives Market Performance and Regulatory Impact
Since the relaunch of its derivatives segment in 2023, BSE has demonstrated significant traction, achieving a 50% market share in index options notional turnover within three years. While the impact of most regulatory changes, such as F&O 2.0 and shifts in weekly expiry days, has been transient, recent stricter lending norms for proprietary traders (effective July 2026) and CAS implementation (August 2026) led to a temporary reset in volume base. This resulted in BSE's notional F&O ADTO falling by 35% in August 2026 compared to the April-July average.
October Sees Significant Volume Recovery
Following the August dip, September witnessed a modest recovery with ADTO growing 6% month-on-month. However, October has seen a substantial surge in volumes, aided by volatile markets, with ADTO jumping 49% month-on-month as of October 20.
MOFSL has revised its revenue and Profit After Tax (PAT) estimates upwards by 8%/10% and 10%/12% respectively for FY27/FY28. The brokerage believes that a sustained volume recovery, combined with an improving premium-to-notional (P/N) ratio, could further boost FY28E PAT by an additional 20%.