- JPMorgan upgraded BSE Ltd. to overweight from neutral following SEBI's consultation paper
- SEBI proposes changes to derivatives settlement and removes limit order cancellations in CAS
- Allowing unexecuted iceberg orders in CAS could enhance liquidity during the auction window
JPMorgan has upgraded BSE Ltd. to 'overweight' from an earlier 'neutral' rating as it expects the Closing Auction Session (CAS) overhang to lift after SEBI's consultation paper
The Securities and Exchange Board of India's consultation paper addresses key concerns raised by option traders by proposing changes to the settlement methodology for derivatives and removing the cancellation of limit orders placed beyond the +/-1% reference price during CAS.
The regulator has also proposed allowing unexecuted iceberg orders to transition into CAS, which could improve liquidity during the auction window.
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Once the CAS overhang lifts trading volumes will likely pick up, according to JPMorgan. The brokerage said that it sees SEBI's consultation paper as direct policy response to the market disruption that has weighed on BSE since introduction of CAS.
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JPMorgan outlined that CAS overhang is set to ease as the settlement methodology is corrected and market familiarity with the auction improves. This will, in turn, support a gradual volume recovery.
However, the brokerage has trimmed its target price for BSE, along with near-term estimates to reflect the volume dip and a more measured recovery path.
The revised target price of Rs 3,950 is lower than the earlier Rs 4,090, but still implies a potential upside of nearly 17% from the current market price.
BSE Share Price & History
Shares of BSE recovered to trade little changed at Rs 3,388 apiece on the NSE on Tuesday, after opening nearly 1% lower. The share price has risen 28.8% year-to-date and over 52% in the last 12 months.
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