BSE shares: Prabhudas Lilladher cuts target price to Rs 4,025 as CAS hits derivatives volumes

Prabhudas Lilladher maintained its buy rating on BSE, but cut its target price to Rs 4,025 from Rs 4,850 after the implementation of the Closing Auction Session (CAS) led to a slowdown in derivatives volumes.

The brokerage said the impact of CAS, compounded by tighter bank-guarantee norms and higher securities transaction tax (STT) on futures and options transactions, could constrain BSE’s near-term growth. However, it remains positive about the exchange’s market position and long-term growth prospects.

Meanwhile, it has reduced the valuation multiple assigned to BSE to 43 times FY28 estimated profit after tax (PAT) from 49 times earlier. It said the stock had already corrected around 12% over the previous month as investors assessed the effect of regulatory headwinds.


Why BSE shares remain under pressure

BSE shares remain under pressure at around Rs 3,316, having declined 6.61% over the past month, while the Nifty Midcap 50 gained 3.36%. The weakness reflects regulatory headwinds from the Closing Auction Session, stricter RBI bank-guarantee rules for brokers, softer derivatives and options volumes, and concerns that NSE could seek permission to trade its shares on its own platform after its IPO.

Regulatory changes weigh on trading activity

Industry derivatives volumes contracted by around 6% month-on-month in August 2026 following the implementation of CAS, according to Prabhudas Lilladher.

Tighter collateral requirements under the revised bank-guarantee rules and the recent increase in STT on F&O transactions are also likely to weigh on overall market growth.

The brokerage now expects activity to slow as participation from proprietary and high-frequency traders has fallen to 60% from 65% in the year-to-date period through August 2025.

BSE continues to hold a 35% market share in index options on a year-to-date basis. However, its index options volumes declined 27% month-on-month in August 2026 after the implementation of CAS, indicating a weaker near-term run rate.

Index options volumes still expected to grow

Although the regulatory changes have slowed trading activity, the brokerage firm still expects BSE's index options volumes to grow 23% year-on-year in FY27 and 20% in FY28.

These projections assume that the current run rate continues through the rest of FY27 because of CAS, the STT increase, and tighter rules governing proprietary trading.

The brokerage's forecasts suggest that BSE can continue expanding its index options business, although growth could be slower than previously anticipated.

Earnings estimates revised lower

Prabhudas Lilladher cut its FY27 and FY28 profit estimates by 2%-6% to account for the slowdown in derivatives activity.

Revenue from operations is now estimated at Rs 5,880.6 crore in FY27 and Rs 7,140.7 crore in FY28. These estimates are 1.4% and 4.4% below its earlier projections of Rs 5,963.7 crore and Rs 7,471.8 crore, respectively.

The brokerage reduced its EBITDA estimates by 1.8% for FY27 and 5.7% for FY28 to Rs 4,331.8 crore and Rs 5,277 crore, respectively.

Its PAT forecasts have been lowered to Rs 3,105.6 crore for FY27 and Rs 3,770.3 crore for FY28, representing cuts of 1.8% and 5.8%.

Earnings per share estimates were also reduced to Rs 76.1 for FY27 and Rs 92.4 for FY28 from Rs 77.6 and Rs 98.1, respectively.

Profit at risk if NSE stays off BSE

The brokerage firm expects BSE's FY27 and FY28 profit to be affected by around 1%-2% if the National Stock Exchange (NSE) does not list its shares on BSE.

Current regulations do not permit an exchange to list its shares on its own platform. NSE would therefore require approval from the Securities and Exchange Board of India (SEBI) to allow its stock to trade on the NSE.

Another possibility is for NSE shares to formally list on BSE while trading on the NSE under the "permitted to trade" category, Prabhudas Lilladher said.

Under the brokerage's sensitivity analysis, BSE's cash-market share is assumed at 9% in FY27 and 12% in FY28 in the base case. In the bear case, its share falls to 7% and 7.5%, respectively.

This could reduce PAT by Rs 34.7 crore, or 1.1%, in FY27 and Rs 91.7 crore, or 2.4%, in FY28.

Fee changes, new products offer growth levers

The firm said BSE could offset some of the regulatory pressure by raising options fees and messaging charges for its co-location facility, helping support profitability. New products, including MSCI-linked futures and options contracts, could provide another source of growth.

While the brokerage expects regulatory changes to constrain BSE's near-term performance, its BUY rating reflects the exchange's strong index options market share and scope to improve revenue through pricing changes and product expansion.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)