Jefferies downgrades BSE on stretched valuations, over-optimistic market share expectations; shares crack 7%

Shares of BSE have had a steller run in September, which has continued, resulting in a 65 percent rise in last one month.

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26 Aug, 2025 12:21

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International brokerage Jefferies has downgraded shares of Asia's oldest stock exchange BSE to 'underperform' as the near-tern risk-reward has turned unfavourable.

The brokerage downgraded BSE to 'underperform' from 'hold', but bumped up its target price to Rs 3,500 per share, up from Rs 2,850 apiece. This indicates a downside of 26 percent from the previous session's closing price.

The recent run-up in BSE shares is fueled by expectations of market share gains; the stock has risen over 100 percent, more than doubling, since the release of SEBI's new F&O framework.

BSE shares cracked almost seven percent to the Rs 4,419.90 level at 10.10 am as investors rushed to offload their holdings.

The valuations are factoring large gains for BSE or a strong bounce-back in market volumes. BSE's valuations at PE of 40x FY26 implies that its market share will rise from 13 percent, as of Q2 to 30-35 percent going ahead.

However, to Jefferies, the valuation seems stretched and fails to capture the risks from the higher impact of the F&O framework on the overall market. Investors might be over-optimistic with their assumption of large market-share gains, added the brokerage.

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Some market participants believe weekly contracts discontinued by NSE could see some trading volume shift to BSE, a factor acting as a sentimental boost for the share price. After market regulator's recent circular, NSE has discontinued weekly expiries for Bank Nifty, Fin Nifty as well as Midcap Nifty.

Rising hopes of rival National Stock Exchange possibly preparing for a public issue soon has added to the optimism around BSE shares as well.

Shares of BSE have had a steller run in September, which has continued, resulting in a 65 percent rise in last one month. On a YTD basis, BSE shares have more than doubled with 115 percent gains, with a large part of the upmove coming in the last three months alone. BSE has a market capitalisation has now reached over Rs 65,000 crore.

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