BSE tumbles 6% on Jefferies' downgrade to 'underperform'

Shares of Bombay Stock Exchange (BSE) fell by 6% to their day’s low of Rs 4,471 on NSE after the global brokerage firm Jefferies downgraded the stock’s rating to ‘underperform’ from an earlier ‘hold’ rating.

However, despite a downgrade in the rating, the global brokerage firm has hiked the target price to Rs 3,500 from Rs 2,850 previously.

Jefferies stated that the stock’s recent run-up was fueled by hopes of market share gains but the valuations are factoring the large gains for BSE or strong bounce back in market volumes.

The report stated that while the discontinued weekly products make up 40% of market premiums, the impact on the overall market could be lower (25-30%) if there is a spillover of trades into the continuing weekly products.

“The assumption of a large market share gain may be over-optimistic and the market is not capturing near- and medium-term risks,” said Jefferies in its report.

“Assuming 25% hit to overall market volumes, BSE's valn. (at P/E of ~40x FY26E) implies its market share rising from 13% in 2Q25 to 30-35% (with 40-50% share in weekly contracts). This appears stretched & fails to capture risks from higher impact on overall mkt, low spillover gains & further regulations,” the report added.

The global brokerage firm also believes that the valuations are running ahead of optimism and the risk-reward has also turned unfavourable with the risks (higher impact of regulations on mkt volumes, low spillover gains for BSE & more regulations) outweighing incremental gains.

BSE is up by more than 100% post the release of SEBI's new F&O framework led by expectations of market share gains.

With SEBI’s directive to limit weekly derivatives contracts to one benchmark index for each exchange, BSE was seen to be profiting from a jump in the volumes as NSE had an expiry on all days except Friday. Under the new regime, BSE will have three more days to compete against NSE.

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Additionally, following markets regulator’s order to limit weekly expiry to one per exchange, BSE had announced that it will discontinue weekly contracts of both Sensex 50 and, indicating that it will retain Sensex, its index of 30 bluechip stocks, derivative weekly contracts.

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