An investor sitting on a nearly Rs 61 lakh profit in BSE Ltd. has been advised to hold the stock despite potential near-term pressure from NSE's listing. Rakesh, a viewer of NDTV Profit's Ask Profit show, said he owns 2,000 BSE shares purchased at an average price of Rs 170 apiece. His original investment of Rs 3.4 lakh has since delivered gains of almost Rs 61 lakh.
The investor sought a long-term view on BSE and asked whether NSE's listing could affect the stock. He also wanted to understand whether changes in futures and options tariffs could create further growth opportunities for BSE's derivatives business.
The question comes after a period of sustained underperformance in BSE shares, according to the show's panel. The impending listing of its larger rival has also raised questions about whether investors should shift from BSE to NSE.
CA Tapan Doshi, research analyst at catapan.in, said Rakesh should continue holding BSE for the long term.
"First of all, big congratulations to him," Doshi said, referring to the investor's acquisition price of Rs 170. He initially wondered whether the quoted purchase price was correct because it was substantially below the stock's prevailing level.
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Will NSE's Listing Affect BSE?
Doshi acknowledged that NSE's listing could exert pressure on BSE shares in the short term. He also said NSE's debut could be muted, although the stock may appreciate over a longer period.
According to Doshi, NSE was valued at around 43 times earnings, while BSE was trading at approximately 45–46 times earnings. He expects NSE to command a higher valuation premium than BSE because of its market position.
The availability of NSE shares in the listed market could consequently lead some investors to reassess their exposure to BSE. This may weigh on BSE's share price in the near term, Doshi said.
However, he does not see that as a reason for long-term investors to exit the stock. Any decline linked to NSE's listing could instead provide an opportunity to accumulate BSE shares, he added.
Can Both Exchanges Perform Well?
Doshi expects both BSE and NSE to benefit from the expansion of India's capital markets. Rising retail participation should support trading activity across the exchanges, while a return of foreign institutional investors could provide another boost.
He also said that BSE's prospects extend beyond its equity and derivatives operations. The company's mutual fund distribution business is performing well, while its platform for small and medium enterprises is another potential growth driver.
"Several of BSE's business segments could contribute to growth over time, reducing its dependence on any single market category," said Doshi.
Higher tariffs in the futures and options segment could also support the exchange's revenue opportunity. However, the competitive impact of NSE's listing and the relative valuation of the two exchanges will remain factors for investors to monitor.
Doshi maintained a positive long-term view on BSE and advised Rakesh not to switch merely because NSE is entering the listed space. "Hold on to this profitability and hold on for the long term," he said. "I think this will do well."
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