Jefferies initiates BSE coverage with 24% upside projection
Jefferies, an international brokerage firm, predicts a 24% increase in BSE stock value over the next year, following a 290% rise this year. The firm anticipates a 150% earnings boost for the stock exchange in FY24 and a doubling by FY26. Indian exchanges are viewed as prime investment opportunities due to robust fundamentals like GDP growth, rising market capitalization, and growing equity market participation.
BSE derivatives market share jumps to 14%
In May, BSE announced the relaunch of Sensex and Bankex F&O contracts, which experienced remarkable month-on-month growth. The BSE derivatives market share has soared from less than 1% to 14% in just six months, fueled by new product launches. Jefferies believes that "continued growth and improved monetization will lift the share of derivatives income to 35% of revenues in FY25."
Regulatory stance supports derivatives growth
Jefferies downplays concerns about high derivatives turnover leading to increased risks, pointing to a relatively lower underlying premium growth rate. The regulatory approach, which favors gradual changes rather than imposing harsh restrictions, supports a positive market trajectory. The brokerage firm highlights the rapid growth in derivatives trading as the main revenue source for exchanges.
Diversified revenue streams boost BSE's prospects
Jefferies sees BSE's diversified revenue streams as a significant advantage. Steady growth segments include cash equities and mutual fund processing, which benefit from macro tailwinds of savings financialization and expanding investor bases. Corporate services are recurring fees, while clearing and treasury profit from heightened market activity. Jefferies has initiated a 'buy' recommendation for BSE with a price target of Rs. 2,700.
How did the market perform on Friday?
On Friday, the stock market ended on a sluggish note as the benchmark Sensex and Nifty indices traded nearly flat. While the Sensex settled at 65,970.04 points, the Nifty stood at 19,794.7 points. Following the broader market trend, the midcap stocks also traded flat with the Nifty Midcap 50 settling at 11,955.25 points.
