BSE shares rally 5% after Jefferies’ upgrade; target price revised to Rs 5,250

Shares of BSE Ltd, Asia’s oldest stock exchange, climbed 4.9 per cent to Rs 5,408.95 on January 14 after Jefferies upgraded its rating from ‘underweight’ to ‘hold.’ The brokerage also raised its target price significantly from Rs 3,500 to Rs 5,250.

The upgrade comes despite recent regulatory changes by the Securities and Exchange Board of India (SEBI), which introduced larger lot sizes in futures and options (F&O) trading. Jefferies highlighted that while these changes initially triggered a steep 70 per cent drop in options contract volumes, the premium decline has been less than anticipated at under 10 per cent month-to-date in January, compared to the forecasted 25 per cent drop.

Structural changes to benefit BSE

Jefferies believes Sebi’s measures could reshape pricing in the derivatives market, potentially benefiting exchanges like BSE Ltd. Discount brokers, whose volumes may shrink by over 40 per cent, are expected to adjust by implementing price hikes. The average ticket size in the industry has already tripled in January compared to November 2024, indicating adaptation to the new norms.

The brokerage expects these structural adjustments to stabilize trading volumes and drive earnings upgrades for BSE in the coming quarters.

Goldman Sachs initiates coverage with neutral rating

In addition to Jefferies’ revised outlook, global brokerage Goldman Sachs initiated coverage of BSE Ltd on January 13 with a ‘neutral’ stance and a target price of Rs 5,060. This reflects a measured optimism about the exchange’s ability to navigate regulatory challenges and leverage emerging opportunities in a disciplined trading environment.

A disciplined F&O market in the making

Sebi’s changes are seen as a long-term effort to bring greater discipline and transparency to the derivatives market. Analysts believe that exchanges like BSE Ltd are well-positioned to adapt and benefit from these reforms, despite short-term challenges.

With regulatory shifts and broker adjustments underway, BSE Ltd is emerging as a strong player poised to capitalize on evolving market dynamics.