BSE slides after foreign broker downgrades stock to 'underperform'

BSE fell 2.62% to Rs 3,356.70 after a foreign brokerage downgraded the stock to 'underperform', citing concerns over lower trading volumes and the impact of the Closing Auction Session (CAS).

The global brokerage also cut its target price by 16% to Rs 2,940 from Rs 3,520 and lowered its FY27-FY29 estimated earnings per share (EPS) by 5-12%.

The brokerage said BSE's revenue from domestic proprietary traders, which account for around 50% of notional turnover, could face headwinds from the securities transaction tax (STT) hike, RBI norms on bank guarantees and the introduction of the Closing Auction Session. It also noted that BSE's options average daily traded turnover (ADTO) in August 2026 was down 12% month-to-date compared with July 2026.

The brokerage added that while consensus expects BSE to gain further market share, its expiry-day market share is now similar to that of NSE, while market-share gains outside T+0 and T+1 expiry days have slowed.

The Closing Auction Session is a separate 20-minute trading session introduced earlier this month, during which exchanges collect buy and sell orders to determine a stock's closing price at the level where the maximum volume can be executed.

The new mechanism replaced the earlier practice of determining the closing price based on the average price of trades during the final 30 minutes of regular trading. It was introduced to provide a more transparent closing price and improve execution efficiency for large orders.

The change, however, has raised concerns over lower participation and its potential impact on trading activity for some market participants.

BSE is Asia's oldest stock exchange and operates trading platforms for equities, derivatives, mutual funds, debt securities and SME listings.

On a consolidated basis, BSE's net profit increased 62.3% YoY to Rs 873 crore in Q1 FY27. Revenue from operations rose 63.5% YoY to Rs 1,566 crore in the quarter ended 30 June 2026. Total revenue increased 63.6% YoY to Rs 1,708 crore. Operating EBITDA surged 67.4% YoY to Rs 1,046 crore, while the operating EBITDA margin expanded to 67% from 65% a year earlier.

Operationally, BSE recorded its highest-ever quarterly equity cash average daily turnover (ADTV) of Rs 9,955 crore. The derivatives segment posted a record average daily premium turnover of Rs 29,615 crore, up 96% YoY. BSE StAR MF processed 23.4 crore transactions during the quarter, while revenue from the platform increased 20% YoY to Rs 73.3 crore.

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