BSE share is 200% up in 2023: What's driving rally
The Indian stock market faced a harsh setback on Monday when benchmark indices dropped sharply after US treasury yields crossed above the 5% mark. However, there's one stock that has been defying all odds: the Bombay Stock Exchange (BSE). BSE's share price is touching new highs every day, despite volatility in the overall market. On Wednesday, at the time of writing, the stock peaked at Rs. 1,828, rising 7%. In 2023, it has gained as much as 200%.
Revision in transaction charges
One primary reason behind the recent rally in BSE shares is the exchange's announcement regarding the revision of transaction charges for Sensex Options, effective from November 1, 2023. This move is in response to the growing demand for Sensex Options, which have seen a major increase in average daily turnover. As per exchange filings, the average daily turnover (ADTV) for BSE Sensex Options in October 2023 was Rs. 23,620 crore, compared to Rs 5,620 crore in July 2023.
Relaunch of derivatives and market share growth
The reintroduction of Sensex and Bankex derivatives contracts with smaller lot sizes and weekly expirations in May 2023 has also contributed to the surge in BSE's stock price. To attract more traders to its platform, the exchange has set its pricing significantly lower than the National Stock Exchange (NSE). This strategy has resulted in nearly 4,00,000 active clients on BSE's derivatives platform since June 2023.
Expanding offerings
BSE's expansion into various segments, including options on futures for precious metals and energy (WTI and Brent crude) and futures contracts for base metals (copper, zinc, aluminium), has further strengthened its position in the derivatives market. This diversification has proven timely, with participation in the cash segment on the rise and BSE gaining market share in derivatives trading.
Strong financial performance in Q1 FY24
In the April-June quarter of FY24, the company's revenue grew up by 15% to Rs. 216 crore, compared with Rs. 187 crore in the corresponding period of the previous year. Its net profit jumped over 1,000% to Rs. 440 crore from just Rs. 40 crore in the same quarter the previous year. However, this was due to an exceptional item. The company has divested 5% stake in its associate company CDSL and the profit on divestment was Rs. 406.6 crore.
BSE's future outlook
One potential concern for BSE's stock is sustaining its growth momentum. A recent report from HDFC Securities suggested that BSE raising its prices would support its revenue growth moving forward and the derivatives segment's performance is expected to remain positive throughout FY24's upcoming quarters.
