BSE shares surge as traders build fresh bullish F&O bets

Mumbai: BSE shares rose Monday as traders piled into fresh bullish derivative positions, encouraged by Sebi's assurance on Friday that a blanket ban on weekly options is off the table.

The stock, which jumped as much as 4% on Monday, ended 2.6% higher at ₹2,542.8. On Friday, the stock erased most of the early-day losses and ended 1.5% higher after dropping as much as 4.7% earlier in the day.

While most of the positives have been priced into the stock after the relief rally in the past two days, there is scope for further upside, owing to the confidence of derivative traders and bullish technical indicators, said Nilesh Jain, head of derivatives and technical research, Centrum Broking.


"The fresh build-up of long positions resulted in the open interest addition of 2% in BSE stock futures - the highest since October 13, which signals traders' confidence," said Jain. "BSE shares decisively surpassed the resistance of ₹2,520 in today's session and the stock is poised for further rally."

The stock has been under pressure due to uncertainty over the extent to which the Securities and Exchange Board of India (Sebi) planned to clamp down on the weekly futures and options segment, among the most popular equity derivatives contracts. Since July, BSE shares have been down 8.2% while the benchmark Nifty is up 1% in the same period.

On Friday, Sebi chief Tuhin Kanta Pandey said: “This (weekly derivatives expiries) is a very sensitive subject and also has a lot of nuances. There has been a problem in the derivatives market, which has been highlighted by Sebi itself.”

LAST LEG OF RALLY?
Analysts said the exchange may post strong earnings growth in September because of the statistical impact of the lower base. But, this growth is expected to slow down from the next financial year.

“BSE is trading at fair valuations currently but a few months down the line, the valuation multiple may look expensive to investors once the numbers start decelerating as growth and profit normalise,” said Dharmesh Kant, head of research, Cholamandalam Securities. “The stock is on the last leg of its rally, which could be curbed once the NSE IPO is announced, as BSE shares are trading at a 3040% premium to NSE’s shares in the grey market.”

Jain said BSE shares could move up to ₹2,750-2,800 levels in the November series. Despite the bullish momentum, analysts recommend caution.

“While investors are buying into a financially sound company that has been performing well, its high valuation and cautious market perception pose significant risks,” said Om Ghawalkar, market analyst, Share.Market. “This profile may appeal to momentum-focused investors, but value-oriented investors would likely find the current entry point unattractive.”