- BSE Ltd. was downgraded to Hold by Nuvama, lowering its target price to Rs 3,240
- Jefferies downgraded BSE to Underperform, cutting target price to Rs 2,940
- Both brokers cited risks to trading volumes, earnings, and market-share gains
BSE Ltd. faced its second broker downgrade in two days on Tuesday, with Nuvama cutting its rating to Hold from Buy and lowering its target price to Rs 3,240 from Rs 4,090. The move came a day after Jefferies downgraded the stock to Underperform from Hold and cut its target price to Rs 2,940 from Rs 3,520, as brokerages flagged risks to trading volumes, earnings and market-share gains.
The two downgrades point to growing pressure on BSE's earnings outlook. Nuvama cut its FY27 and FY28 earnings-per-share estimates by 6.3% and 15%, respectively, while Jefferies lowered its FY27-29 estimates by 5-12%. Nuvama said consensus estimates could also be reset after BSE's second-quarter earnings.
Nuvama Cuts
Nuvama said changes in expiry-day trading dynamics following the introduction of the calendar spread adjustment, or CAS, have affected volumes. It also identified bank guarantee norms as another pressure point and said BSE's market-share gains were "nearing saturation."
Nuvama cut its target price to Rs 3,240 from Rs 4,090 and downgraded the stock to Hold from Buy. The brokerage has now cut its target price for BSE for the third time in three months.
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The brokerage also lowered its FY27 and FY28 EPS estimates by 6.3% and 15%, respectively. It said consensus estimates could see a reset after BSE's second-quarter earnings.
Jefferies Turns Bearish
The Nuvama downgrade followed Jefferies' move on Monday to cut BSE to Underperform from Hold and reduce its target price to Rs 2,940 from Rs 3,520.
Jefferies said revenue from domestic proprietary traders could come under pressure. It estimated that this revenue accounts for 50% of BSE's notional turnover.
The brokerage also pointed to the higher securities transaction tax, RBI bank guarantee norms and CAS as headwinds for BSE. It said BSE's option average daily traded value in August was down 12% month-to-date compared with July.
Jefferies cut its FY27-29E EPS estimates by 5-12% and said BSE's market-share gains outside T+0 and T+1 days had slowed. The brokerage has also cut its target price for BSE for the third time in three months.
Stock Under Pressure
BSE shares fell for the fourth straight trading session on Monday. The stock has declined 7.3% over the past five trading days and 7% over the past 30 days.
Despite the recent decline, BSE shares have gained 24% over the past 12 months.
Consensus Stays Bullish
The broker downgrades contrast with the broader analyst consensus tracked by Bloomberg. Of the 18 analysts covering BSE, 10 have a Buy rating, seven have a Hold rating and one has a Sell rating.
The consensus target price stands at Rs 3,964.18, implying about 19% upside from Monday's close.
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