BSE Can Face 6% Hit In Profit On Every 10% Drop In Options Premium Average Daily Turnover: UBS

As the Securities and Exchange Board of India looks to raise the tenure maturity of equity derivatives, UBS Global Research sees this development as impacting BSE Ltd.'s profitability in the case of removal of weekly expiries.

In their latest note, UBS stated that every 10% drop in options premium average daily turnover can impact 6% profitability for the stock exchange's counter.

This development comes on the back of a top SEBI official stating that the regulator is planning to raise tenure and maturity for equity derivatives.

SEBI Chairperson Tuhin Kanta Pandey stated at an industry event in Mumbai that the market regulator is looking into the derivatives contract durations and will make changes after a consultative process.

Pandey said the SEBI is looking to improve tenure and maturity of equity derivative contracts and hinted that a consultation paper will come on the same. He also said that the cash market has deepened, and the volume has doubled in three years.

UBS had initiated coverage on India's second-largest stock exchange nearly five months ago and continues to remain bullish on the company. The brokerage has a target price of Rs 3,200 on the counter, with a 'buy' call, implying a 37.4% upside from Thursday's closing price.

Volumes moving from National Stock Exchange Ltd. to BSE are not fully priced in, said the brokerage when it initiated its coverage.

The BSE stock rose 159.87% in 12 months, and advanced 31.26% on a year-to-date basis. 

Out of 13 analysts tracking the company, eight maintain a 'buy' rating, four recommend a 'hold' and one suggests 'sell', according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 13.8%.

Shares of BSE ended with a steep fall of 7.65% to Rs 2,330.10 apiece, while the benchmark NSE Nifty 50 advanced 0.13% on Thursday.