Jefferies cuts BSE rating on 'unfavourable' risk-reward

Mumbai: Brokerage Jefferies downgraded its rating on BSE to 'Underperform' from a 'Hold' earlier citing unfavourable risk-reward in the near term. The firm raised its price target to ₹3,500 from ₹2,850, but the new forecast still implies a downside of 22% from Wednesday's closing price.

BSE shares ended 5.4% lower at ₹4,495. It has gained over 205% in the past year, and 32% in the last month.

Jefferies said the recent run-up in BSE shares listed on the NSE was following the Securities and Exchange Board of India's new tighter regulations for equity futures and options.


"BSE's recent run-up has been fueled by hopes of market share gains from spillover trades," said the brokerage. "We feel the risk-reward has turned unfavourable with the higher impact of regulations on market volumes, low spillover gains for BSE & more risks outweighing incremental gains."

BSE's valuation at an estimated Price to Earnings Ratio of 40 times implies its market share rising from 13% in the second quarter of FY25 to 30-35% (with 40-50% share in weekly contracts).

"This appears stretched and fails to capture risks from the higher impact on the overall market, low spillover gains and further regulations," said Jefferies.