Jefferies downgrades BSE after stock zooms 201% in last one year; stock tumbles over 6%

Shares of the country's oldest stock exchange BSE traded with a steep cut and at day's low tumbled nearly 6 per cent to Rs 4,471. The sharp drag in the stock comes after Jefferies downgraded the stock from 'hold' to 'underperform' rating.

The stock target price has though been enhanced to Rs 3,500 per share. In the bull case, the global brokerage has pegged the target at Rs 4,800, while in the base case, it sees BSE stock hitting levels of Rs 3,000.

At the last count at around 10:05 am, shares of the company traded with a cut of over 6 per cent at Rs 4,454.55 per share.

Jefferies said that the company's stock saw multibagger gains post the SEBI F&O framework amid expectations of better and higher market share for the country's leading exchange.

The company at the current price trades at expensive valuation with the PE of 40x based on FY26 forward EPS.

Also, the exchange faces stress amid changing regulatory norms. 

Further, the brokerage stated that the market is discounting BSE's 40-50 per cent market share in weekly contracts. The brokerage also envisages the calendar spread benefit for the stock on the expiry coupled with an impact on volumes amid changes in the upfront margin rules.

BSE stock technicals

Jigar S. Patel, Sr. Manager - Equity Research, AnandRathi  on the stock's technicals said, "At the current point in time, the price action of BSE is significantly above all major exponential moving averages (EMAs), indicating that the stock or index has been trading at higher levels for a prolonged period. However, there is a bearish divergence on the Relative Strength Index (RSI) in the daily chart."

A bearish divergence occurs when the price makes higher highs, but the RSI fails to make corresponding highs, suggesting weakening momentum and the potential for a price reversal or pullback.

So, the expert expects a short-term pullback to the 4200 level and  In light of this, it would be prudent for traders to book profits during any upward bounces rather than initiating new long positions, as the risk of a downside correction is high.

BSE Q1 results

The exchange's PAT soared 148 per cent QoQ to Rs 265 crore. However, revenue from operations increased 24.43 per cent sequentially to Rs 607.70 crore in the quarter ended 30 June 2024. Nonetheless, YoY (year-on-year), the exchange and data platform's consolidated net profit declined 39.95% while revenue from operations soared 181.84% during the first quarter of FY25.

Profit before tax stood at Rs 349.37 crore in the June 2024 quarter, up 126.97 per cent quarter on quarter (QoQ) while down 32.33% year on year (YoY).

BSE share price performance

In the last one year, the stock has zoomed and quadrupled investors wealth with 201 per cent return.