Shares of the BSE are on fire in the last couple of months. Between March 11 and May 16, the price has risen 91% – from Rs 3,809 to Rs 7,285. According to experts, various factors, including market share gain, new regulations for derivatives and increased interest for unlisted National Stock Exchange (NSE) have driven BSE’s share price to almost double from the low it had hit in March.
Sudip Bandyopadhyay, group chairman of Inditrade Capital, said at these levels, acquiring can only be done for the long-term and it is richly valued, for now. He added that some of the positives that are aiding the sentiment include the rise in F&O market share, new rules by the markets regulator in the derivatives space and incremental volume gain anticipated for listing of the country’s biggest stock exchange, NSE, Exchange – on it.
Recently, the NSE emerged as the largest unlisted firm in India in terms of the number of investors, with over 100,000 shareholders, from 39,000 in March-end, in anticipation of the launch of its initial public offering and a lower entry point of Rs 1,200 per share after it had declared a bonus issue of four shares for one in October. The share price has risen more than 39% to Rs 1,675 in the unlisted market. Experts believe that there is an increased interest from retail investors, and it is as liquid as any listed stock.
Also, the sale is happening from HNIs (high net worth individuals) to retail investors, according to an expert who also noted that valuations have changed.
In FY25, BSE’s profit jumped 227% to Rs 1,322 crore and revenue soared 116% to Rs 2,957 crore. NSE’s revenue rose 16% to Rs 17,141 crore and the net profit climbed 47% to Rs 12,188 crore. In terms of market share, the BSE has 5.4% and 36.5% in the cash and derivatives markets, respectively, as of the quarter ended March, compared with NSE’s 94.6% and 63.5%. BSE’s F&O market share in the second quarter of the last fiscal was only 4.2%.
The increase was driven by Sebi requiring the exchanges to have only one index with weekly expiry contracts as it led to the discontinuation of Nifty Bank’s weekly contracts, which garnered the largest number of contracts.
Another market participant expects the exchanges to gain value with the economy growing, as the number of listed companies will also grow, leading to an increase in trading volumes along with foreign money. According to him, the entire rally in the BSE was captured by HNIs, and retail investors hardly participated.
To attract volumes, the NSE had notified to change the day of weekly expiry to Monday. However, soon after the notification, a Sebi circular proposed that expiries of equity derivatives contracts of an exchange should happen either on Tuesday or Thursday.
According to the market participant, new Sebi rules have ensured a level playing field and volumes are getting split between the BSE and NSE, leading to a better-than-expected profit growth. What is also helping BSE’s phenomenal profit growth is that it is slowly increasing charges to come in parity with the NSE as the technology became competitive, he said.