Mumbai: Jefferies has downgraded its rating on BSE Ltd to “underperform” as the near-term risk-reward has turned unfavourable. While downgrading BSE shares to ‘underperform’ from its earlier call of ‘hold’, the global brokerage firm revised its price target on the stock higher to Rs 3,500 from Rs 2,850 earlier. The target indicates a downside of 26 percent from the previous session’s closing price.
Jefferies’ new projection comes despite the rally seen in BSE’s shares, the stock gaining over 100 percent, since the release of Securities and Exchange Board of India’s framework for futures and options trading.
The brokerage stated that the expectations “appears stretched, fails to capture risks from higher impact on the overall market, and low spillover gains and the assumptions of largest market share gain may be over-optimistic.”
Jefferies predicted a a downside of nearly 25 per cent to overall market volumes, the current valuations of BSE, which are at 40 times financial year 2026 earnings. “While the discontinued weekly products make up 40% of market premiums, the impact on the overall market can be lower (25-30%) if there is a spillover of trades into the continuing weekly products,” it said. In April 2024, Jefferies had downgrded BSE to ‘hold’ from ‘buy’, and reduced its price target to Rs 2,900 from Rs 3,000.
“At the current market price, BSE’s valuation (at P/E of ~40x FY26E) implies its market share rising from ~13% in 2QFY25 to 30-35% (with 40-50% share in weekly contracts). This appears stretched and does not capture risks from higher impacts on the overall market,” Jefferies said.
The BSE, established in 1875, is one of the largest securities markets in the world. Over 6000 companies are listed on it. The benchmark Sensex closed lower on October 15, 2204 due to selling in heavyweights including HDFC Bank, Reliance Industries, and Bajaj Finance. The weak quarterly results of domestic companies and increase in inflation figures hit investor sentiments.
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Jefferies downgraded BSE shares on stretched valuations, over-optimistic market share expectations. Markets Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
