BSE share price jumped over 4% on Monday after brokerage firm Motilal Oswal Financial Services upgraded its rating on the stock to ‘Buy', citing an expected recovery in derivatives volumes following the partial reversal of the Closing Auction Session (CAS) framework and potential gains in cash-market activity following the listing of the National Stock Exchange (NSE). BSE shares rallied as much as 4.27% to Rs 3,369.00 apiece on the NSE.
The brokerage has set BSE share price target of Rs 4,000 per share, implying an upside potential of over 23% from Friday's closing price.
Motilal Oswal has raised its revenue estimates for BSE by 8-10% and net profit estimates by 10-12% for FY27 and FY28, factoring in the strong volume run-rate, the anticipated benefits of the partial CAS reversal and the potential boost to cash-market volumes from NSE's listing.
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The brokerage expects a sustained recovery in trading volumes, coupled with an improvement in the premium-to-notional (P/N) ratio, to drive a further increase of around 20% in BSE's FY28 profit after tax (PAT).
BSE Trading Volumes Recover; CAS Reversal To Provide Further Impetus
BSE's futures and options (F&O) notional average daily turnover (ADTO) surged 85% in October 2026 so far compared with the levels recorded after the CAS-related reset in August 2026.
The partial reversal of CAS, scheduled to take effect on December 7, 2026, is expected to provide an additional regulatory catalyst for volume growth, beyond the recent increase driven by market volatility.
Motilal Oswal expects BSE's FY27 ADTO to rise 16% year-on-year (YoY) to Rs 216 lakh crore, with further upside possible if the recovery in trading activity sustains.
While BSE has already secured a market share of over 30% in premium turnover, the brokerage believes there is scope for further gains. The exchange's P/N ratio has increased to around 14 basis points from 6-7 basis points in 2023-24, although it remains below the 20-basis-point-plus level recorded by NSE.
Further convergence in the P/N ratio, supported by greater institutional participation and increased activity in longer-dated contracts, could generate meaningful earnings growth beyond the benefits of higher trading volumes, the brokerage said.
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NSE Listing, Rising Cash-Market Share To Support Growth
BSE's cash-market share has improved to around 9% from approximately 7%, indicating an improvement in its competitive position.
The opening of NSE shareholder lock-in period in March 2027 could provide additional catalysts for cash-market turnover, according to Motilal Oswal.
The brokerage also expects improvements in smart-order routing and greater platform participation to support a sustained increase in cash-market activity. It projects a compound annual growth rate (CAGR) of 30% in BSE's ADTO between FY26 and FY28.
Star MF, Co-Location Business Diversify Revenue Streams
Beyond its core trading business, BSE's Star MF platform and co-location services are emerging as additional drivers of growth.
Star MF has expanded significantly, with quarterly transactions increasing from 12 million in the first quarter of FY20 to 245 million in the second quarter of FY27. The platform now generates more than Rs 800 million in quarterly revenue.
Meanwhile, BSE's co-location business contributes approximately Rs 450-480 million per quarter, with further growth potential from additional capacity and pricing opportunities.
These businesses broaden BSE's earnings base and reduce its dependence on trading activity alone.
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BSE Earnings To Benefit From Operating Leverage
BSE's operating leverage has strengthened considerably, with its EBITDA margin expanding to over 65% in FY26 from 9% in FY21. Motilal Oswal expects margins to increase further to around 70%.
The brokerage forecasts a 27% CAGR in BSE's PAT between FY26 and FY28, supported by revenue growth of 23% over the same period.
The variable nature of regulatory costs, which account for around 55% of operating expenses, also provides a degree of protection against periods of weaker trading volumes.
Outlook: Volume Recovery And Margin Expansion Key To Growth
Although the implementation of CAS weighed on trading volumes in August 2026, activity began recovering in September and accelerated in October, partly supported by heightened market volatility.
The partial reversal of CAS from December 2026 is expected to accelerate the normalisation of derivatives activity, supporting revenue growth and margin expansion through operating leverage.
Motilal Oswal expects BSE to benefit from a combination of recovering trading volumes, rising member participation and an improving P/N ratio. A stronger growth trajectory in the cash-market segment, continued demand for co-location services and the expansion of the Star MF platform are also expected to support the exchange's earnings outlook.
At 11:00 AM, BSE share price was trading 3.96% higher at Rs 3,358.80 apiece on the NSE.
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