Up 300% in 6 months, BSE shares get 'Buy' from Jefferies; target at Rs 2,700

The rally seen on stock exchange BSE may have more steam left. Jefferies has initiated coverage on the stock with a 'Buy' rating and a base case target of Rs 2,700, which suggests a potential 24 per cent upside on the counter from the prevailing levels. The stock is up 292 per cent year-to-date (YTD) and 302 per cent in the last six months.

Led by strong growth and margins uptick, BSE should deliver 150 per cent earnings jump in FY24E and double it over FY24-26E, Jefferies said. The BSE stock trades at 31 times one-year forward PE vs RTAs’ 38 times, AMCs’ 28 times, depositary's 48 times and distributors' 30 times, it noted. It values BSE at 35 times September 2025E PE.

Jefferies said BSE's cash equities (20 per cent of revenue mix) and mutual fund processing (10 per cent of mix) are steady growth segments (FY20-23 CAGR 27 per cent) riding on macro tailwinds of financialisation of savings and growing investor base.

"Corporate services (35 per cent of mix) are recurring fees and clearing and treasury (25 per cent of mix) benefit from higher market activity. Addition of derivatives segment will improve the already healthy long-term growth outlook for BSE," it said.

Indian stock exchanges, it said, are benefiting from financialisation of savings, rising equity participation, growth in equities, product innovations & stable fees as against other capital market platforms. Besides, it said stock exchanges are insulated from risks of compression in fees, unlike the debate between active and passive AMCs as well as discount & full-service brokers.

"Derivatives are now the largest revenue stream for exchanges (65 per cent for market leader NSE) driven by growing user base (10 times in 5 years) and sachetisation of products to lower ticket sizes. Continued growth in equity investor base, higher share of derivatives users (currently 10 per cent) and new low-ticket products should keep derivatives growth (30 per cent FY24 YTD) in fast lane," it said.

BSE, Jefferies added, can leverage macro-tailwinds along with headway into derivatives to deliver 150 per cent earnings jump in FY24E and double it over FY24-26E.

The foreign brokerage does not see systemic risk from the high derivatives turnover growth (140 per cent YTD), as "it masks the relatively lower underlying premium growth (30 per cent YTD). Over last 4 years, despite 8 times jump in turnover, premiums have grown by 3 times. Further, share of small retail options traders in system premiums is

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