BSE is in focus on the back of a host of factors. The share price of BSE has corrected nearly 19% in the last 3 months.From expiry wars to tenure tweaks, there are many factors that are playing on the stock. After SEBI Chief Tuhin Kanta Pandey highlighted that a discussion paper on increasing the tenure of index options is expected, the buzz on the likely contours of the paper and potential changes to derivative expiry days/periods is back.
In this context, the brokerage house Nuvama believes that “limiting expiries may be most damaging to earnings of exchanges.” They have modelled in five possible scenarios, throwing up possible cuts in BSE’s FY27 earnings in the range of 19.8 – 38.5%. Though they are maintaining the Buy rating on BSE with a target price of Rs 2,820 per share, they reiterated that they may revisit the recommendation once clarity emerges on the matter.
Nuvama on BSE: Scenario 1
According to Nuvama’s estimates, if the current schedule of BSE/NSE expiry on Tuesday/Thursday format continues but is limited to mid-month and month-end expiries, one can expect the average daily premium turnover in the market to dip 48.4% compared to current estimates for FY27. Considering BSE’s market share of 20.1%, they reckon BSE’s FY27 turnover may fall 55.8% to Rs 6,600 crore compared to the current estimates. This would imply a 26.8% cut in BSE’s FY27 EPS estimates, as per Nuvama.
Nuvama on BSE: Scenario 2
In case the different day (Tuesday/Thursday) monthly expiry format continues, Nuvama expects a further dip in the average daily premium to 66.8% to Rs 21,000 crore. As per their calculation with BSE’s market share at 15.9%, the FY27 average daily turnover may potentially slip to Rs 3300 crore, down 77.5% in FY27. It would then imply a 36.7% cut in FY27 EPS for BSE.
Nuvama on BSE: Scenario 3
In this case, Numvama pointed that this would be an alternative to only monthly expiry, “in which we assume BSE will have a mid-month expiry Vs NSE’s end-month expiry, but the expiry day remains the same.” In this, contracts will be month-long, but expiries will have about a two-week gap. Then they expect the daily average turnover estimates for FY27 to dip 54% to Rs 29,100 crore, with BSE’s MS rising to 27.5%. The FY27 EPS estimate in this case is seen slipping 19.8% to Rs 43.70.
Nuvama on BSE: Scenario 4
If the exchanges have fortnightly expiry, but the expiry day remains the same, Nuvama expects the FY27 market ADPTV or the average runover to fall 47.6% to Rs 33,100 crore. In that case, the FY27 turnover may slide 66.3%, implying a 32% cut in FY27 EPS to Rs 37 a share.
Nuvama on BSE: Scenario 5
If there is same-day monthly expiry, Nuvama expects daily average turnover for exchanges to fall 54.1%, and as a result, their calculation suggests an “80.8% drop in FY27 ADPTV, implying a 38.5% cut in FY27 EPS.”
Nuvama, in its report, pointed out that they are “not building in any benefit of potentially higher trading volumes on leftover expiry days due to fewer overall total expiry days.” In their assessment, they added that they are also mindful that “exchanges will have room to raise charges and mitigate this hit; overall impact may thus be lower.”