By Ananthu C U
Bombay Stock Exchange Limited (BSE) shares had a terrific run over the last year. Since the market regulator SEBI implemented rules in the futures and options (F&O) segment, the stock has gained. BSE has benefited as it clawed back market share from the National Stock Exchange. This is reflected in its stock price and the latest quarterly results.
Q4 Results
BSE posted a 361% year-on-year increase in consolidated net profit to Rs 494.42 crore in its April 2025 quarter. Its operational revenue grew 74% from the previous year to Rs 846.64 crore. The stock exchange’s transaction charges grew 112% from the previous year to Rs 611.70 crore. The transaction charges made up 72% of the company’s revenue.
Transaction charges are what a stock exchange makes on each transaction by a client. This includes both the cash market and the derivatives segment.
Importance of transaction charges and derivative segment
SEBI had announced new rules in October 2024 to reduce the frenzy in the derivatives market. The regulation required stock exchanges to have only one weekly expiring option contract.
India’s growing derivative market has caused healthy transaction charge growth for market players. This included stock exchanges and brokerages. Hence, when SEBI announced curbs, these institutions expected a fall in trading activity. Which in turn reduces transactions and related charges.
Zerodha’s CEO, Nithin Kamath, said the rules will impact 60% of overall F&O trades and 30% of Zerodha’s orders. The impact was felt as F&O volumes fell. As of March 2025, the F&O volumes fell to Rs 15,205 lakh crore from Rs 32,734 lakh crore in Q2 FY25.
Market share in derivative segment
NSE had a 100% market share in the Equity Options segment in Q1FY24 (quarter ending in June 2023). BSE relaunched Sensex and Bankex derivative contracts in May 2023. This was to fight for market share in the lucrative options segment.
NSE’s market share in the options segment has declined to 81.2% in the March quarter of FY25. BSE captured the rest.
While BSE’s efforts to capture market share have worked, some of it was due to the market regulator’s F&O rules. Motilal Oswal, in a January 2025 report, pointed out that BSE’s premium average daily turnover (ADTO) grew by 9% in December 2024 when the industry volumes declined.
NSE at that time had four weekly expiring contracts while BSE had only two. Hence, BSE had a lesser impact from the regulations. BSE kept Sensex as its Weekly contract while NSE kept Nifty. NSE had to stop the Bank Nifty weekly contract. This had a huge impact as it was one of the most popular contracts in the market.
Management views
BSE management in its earnings call said it will focus on adding new clients in options segment. This will help add liquidity to the contracts. The stock exchange also plans to increase its co-location racks to 500 by March 2026. It currently has 300 racks. Colocation racks are used by clients to host their servers within BSE’s premises. This will help execute trades faster.
Brokerage views
Jefferies in their May 6, 2025 report, kept a “hold” rating and increased the target price to Rs 7,000, implying a potential gain of 6% from current levels. The global brokerage firm raised earnings estimates by 10-11%. This was to factor in stronger option revenues and better revenues with more racks. The brokerage also expects a 21% compound annual growth rate in revenue and 27% growth in profit over FY25 to FY28. Jefferies’ target price put the value of the stock at 40 times June 2027 P/E ratio.
Motilal Oswal also, in its May 7 report, maintained its “buy” rating on the scrip with a target price of Rs 7,600, 15.1% higher as compared to current levels. This valued the stock at 45 times FY27 earnings per share. The domestic brokerage firm increased its earnings estimate by 9% for FY26.
The brokerage sees different factors as key growth drivers for BSE. They are increased member participation, colocation monetisation and sustained momentum in premium turnover.
Stock performance
BSE’s share price had closed at Rs 6,600 on May 9, 2025. The stock had gained 38.65% since November 21, 2024. Since then, exchanges moved to the single weekly expiry for a benchmark index. The stock has a healthy Return on Equity (ROE) of 34.1% and Return On Capital Employed (ROCE) of 43.5%. The stock had a P/E ratio of 67.6, slightly higher than its median 10-year P/E of 28.6.
Conclusion
In a nutshell, BSE has delivered strong performances recently. It has wrestled market share back in the derivatives segment. The brokerages are positive on the company to continue its momentum. However, it is trading at healthy valuations. Hence, investors should make an informed decision whether to add the stock to their portfolio.
Disclaimer
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Ananthu C U is an equity market journalist who has written about listed companies, equity market regulations, and economic development. He is deeply interested in increasing his knowledge about the equity market, the Indian economy and listed Indian companies. He generally tracks infrastructure, power and financial companies.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.