BSE shares tumble 5% after Jefferies downgrades stock to 'underperform'. Here’s why

Shares of BSE declined as much as 5% to their day’s low of Rs 3,283 on the NSE on Monday after Wall Street major Jefferies downgraded the counter to 'underperform' from 'hold' and trimmed the target price to Rs 2,940 from Rs 3,520, a downside of 16% from current levels.

Jefferies flags risks to BSE’s revenue from domestic proprietary traders, who account for around 50% of notional turnover. It sees headwinds from the STT hike, RBI’s bank guarantee norms and the Closing Auction Session (CAS). BSE’s options average daily turnover in August 2026 so far is down 12% from July.

While consensus expects the Sensex to continue gaining market share, Jefferies notes that BSE’s expiry-day market share is now similar to NSE, while market-share gains outside the T-0/T-1 days have slowed.


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Multiple headwinds

Proprietary traders account for around 50-60% of equity options notional turnover, with domestic prop traders likely contributing about half of the overall turnover. A recent interaction with an F&O trader indicated that the Closing Auction Session (CAS) is resulting in higher losses for domestic prop traders.

Options ADTO for NSE and BSE in August 2026 so far was down 14% and 12%, respectively, compared with July. Options ADTO declined 20-23% for BSE and NSE in the second week of CAS compared with the first week.

Meanwhile, RBI’s tightening of bank guarantee norms is unlikely to have an immediate impact but could adversely affect premium turnover by up to 10% over the next year, according to Jefferies.

Jefferies cuts estimates

Jefferies has cut its FY27-29 EPS estimates for BSE by 5-12%, citing expectations of slower average daily turnover (ADTO) growth and higher clearing costs. The brokerage expects ADTO to recover in the second half of FY27 compared with Q2FY27 as issues related to the Closing Auction Session (CAS) are resolved.

However, if BSE’s market share remains flat in FY28-29 compared with FY27, Jefferies sees a further 2-5% downside to earnings. It has also cut its price target by 16% to Rs 2,940, based on 34x September 2028 estimated core EPS. The revised valuation multiple is 6% below its earlier fair multiple of 36x, reflecting rising concerns over ADTO growth.

Management transition: News reports indicate that SEBI’s proposal to raise the upper age limit for managing directors and CEOs of market infrastructure institutions (MIIs) has faced resistance. BSE’s MD & CEO is set to approach the existing age threshold in June 2027.

Meanwhile, BSE has appointed two executive directors: Saurabh Shukla, who will oversee Critical Operations, and Gopalan S. Raghavan, who will handle Regulatory, Compliance, Risk Management and Investor Grievances.

How can BSE flip the script? BSE has two key levers to offset pressure on revenue growth: (1) increase option fees, currently at Rs 325 per Rs 1 million of premium turnover versus Rs 350 for NSE, which could add 6-7% to EPS, and (2) raise messaging fees for its colocation facility, which could add around 8% to PAT. However, investors may be assigning a higher valuation to BSE based on volume-led growth.

Read more: Explained: How BSE traded fewer contracts after CAS but premiums rose 75% in first week

BSE Q1 results

The company reported a 62% year-on-year (YoY) jump in consolidated net profit to Rs 874 crore for the April-June quarter of FY27, helped by strong growth in revenue from operations and higher investment income.

BSE’s revenue from operations meanwhile rose 63% to Rs 1,566 crore in the first quarter of the ongoing financial year 2027, from Rs 958 crore reported in the corresponding quarter of the previous financial year. Investment income also rose sharply to Rs 135 crore from Rs 79 crore, while other income stood at Rs 5 crore against Rs 7 crore in the year-ago period.

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