After Sebi's F&O proposals, Jefferies cuts BSE's EPS estimates for FY26/27 by 10%

The brokerage report on the exchange also commented on the impact Sebi's downstreaming rule can have on BSE's float income.

If the market regulator goes ahead with its proposals on index-derivatives, BSE may discontinue its Bankex product, according to Jefferies, which has therefore cut its earnings per share (EPS) estimates for FY26/27 by 10 percent.

In its latest report on the exchange, the brokerage's analysts have retained their hold rating on the stock and have cut their price target to Rs 2,850 (at an implied P/E of 34x June 26E) from the earlier Rs 3,000. BSE Ltd was trading at Rs 2,605 at 2.30 pm.

Jefferies wrote that they "remain watchful on the final impact on volumes of continuing products post the new norms".

Also read: Sebi proposes changes to index derivative framework to reduce speculation, suggests fewer weekly expiries

On July 30, the Securities and Exchange Board of India (Sebi) floated a consultation paper for new norms on index-derivatives to protect investors and to maintain market stability. One of the proposals was to reduce weekly expiries and allowing a weekly contract of one index per exchange.

Currently, there are index-based contracts that expire every day. The regulator is proposing to allow weekly contracts of one index of an exchange. If this comes to pass, there will be two expiries a week.

In a recent report, Jefferies had highlighted that Sebi's proposed F&O measures can affect 35 percent premiums collected by the overall market. In the report, the analysts had said that of all the measures, the highest impact would be from the reduction in the number of weekly contracts to one benchmark index per exchange. That is, there would be a total of six weekly contracts in a month versus the 18 currently.

They wrote, "Currently, weekly premiums make up ~65% of overall industry premiums and depending on the choice of index (to be continued) by exchanges, supply of contracts amounting to ~35% of industry premiums can be removed. Spillover of trading activity (if any) from these into the two continuing products can limit the impact to 20-25% for the system."

On BSE, the analysts wrote in their latest report, "BSE will have to discontinue one of its two weekly options products; impact on volumes for the continuing product will depend on overall market participation. We await the final draft of the circular and implementation schedule of the new norms."

Also read: How Sebi's seven proposals for index derivatives could affect traders

The brokerage report on the exchange also commented on the impact Sebi's downstreaming rule can have on BSE's float income.

The report noted, "Treasury income on Clearing & Settlement float (+8% QoQ) has grown exponentially over the last year (~2.8x YoY in 1Q) and now makes up ~18% of consolidated PBT. However, recent SEBI discussion paper proposed downstreaming of certain parts of float income back to clients. This measure, if implemented, can impact clearing float income by ~20-30% and have an EPS impact of ~6%."