BSE shares fall 4% to snap 3-day rally as Bernstein forecasts up to 17% downside

Shares of BSE declined as much as 4% to their day’s low of Rs 3,268 on Wednesday after international brokerage firm Bernstein initiated coverage on the stock with an Underperform rating and a target price lower from current levels.

The Wall Street giant has pegged the target at Rs 2,820, implying a downside potential of up to 17% from the last closing price of Rs 3,394. The brokerage said the retail participation wave, led by equity derivatives, is showing signs of moderation, and BSE's market share gains are likely to peak out in FY27, after which growth is expected to normalise.

The brokerage said exchanges have delivered handsome returns as the wave of retail participation has boosted earnings and valuations. However, given the speculative nature of this growth, Bernstein believes investors need to look beyond top-down factors and focus on a framework based on near-term volume trends, which will drive earnings revisions and valuations.


Also read: Will BSE shares recover from CAS hit? HDFC Securities rates stock 'add'

In contrast, Bernstein has initiated coverage on exchanges with an Outperform rating on MCX and a target price of Rs 3,830 (15% upside). It sees an inflection in commodities, with equity derivatives providing a long runway for growth.

Why does this matter to BSE investors?

The development gains significance as stock exchanges acknowledged that the newly introduced Closing Auction Session (CAS) had resulted in lower trading volumes.

Last month, NSE’s total monthly equity derivative turnover stood at Rs 34.48 lakh crore, the lowest since November 2023. BSE’s August turnover stood at Rs 32.2 lakh crore, the lowest since June 2025.

Wall Street brokerage Jefferies, in a report earlier this week, said the key challenge with CAS has been the uncertainty on expiry day, forcing option writers to stay away from the market. This has reduced the profitability of proprietary traders. Jefferies said Sebi could address the challenges with CAS through three measures: delinking options expiry from the CAS window, improving the stock lending and borrowing mechanism, and deepening the auction pool.

BSE to feel the pinch in Q2?

Domestic brokerage firm ICICI Securities suggests that BSE’s premium ADTV stood at Rs 18,700 crore in August, down 26.5% from Rs 25,400 crore in July. For the second quarter, premium ADTV stood at Rs 22,000 crore, down 25.7% from Rs 29,700 crore in the first quarter.

BSE’s average daily option contracts traded stood at 98 million in August, down 34.5% from 150 million in July. BSE’s average daily option contracts traded in the second quarter stood at 124 million, down 20.2% from the Q1FY27 average of 156 million.

Read more: D-Street’s CAS turmoil clouds BSE’s growth outlook

In a circular last week, Sebi said it would review the methodology used to determine settlement prices for derivative contracts on expiry, following feedback from market participants after the rollout of the new CAS in the equity cash market.

“Having considered the experience of the initial period of CAS implementation and the feedback received from various stakeholders, Sebi may be proposing certain changes in the methodology for determining settlement prices of derivative contracts, for which a consultation paper will be issued in about a week,” Sebi said in a statement.

Despite the recent dip, BSE shares are up 25% on a year-to-date basis and about 40% in the last one year.

(This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.