Jefferies Warns Earnings Cut For BSE, Nuvama Amid Speculation On Derivative Expiry Changes

Brokerages and exchange stocks could see a sharp earnings cut if the Securities & Exchange Board of India (SEBI) moves ahead with changes to the expiry cycle of index derivatives, according to Jefferies.

In a recent note, the brokerage firm has highlighted that there has been much speculation regarding potential changes to the expiry cycle of derivative contracts.

This comes in the midst of reports that SEBI may consider extending the expiry cycle for index options from weekly to fortnightly or monthly. No official confirmation has come from SEBI as of yet.

Nevertheless, the Jefferies note has highlighted that there will be a material impact on the F&O volumes of BSE and Nuvama if these changes do take place.

A Jefferies-run scenario explains the implications for these listed players, estimating that BSE, for one, could see 20-50% cuts to its earnings per share (EPS) by fiscal 2027. For Nuvama, that number could be around 15-25%.

The scenario simulates that a fortnightly cycle with separate expiry days could see BSE incurring a 21% impact on its earnings. That number could increase to 35% in the event of a same-day expiry.

Nuvama, on the other hand, could see a 15% impact on both same-day and separate-day scenarios.

BSE's woes could deepen if SEBI changes to a monthly expiry, in which case a separate day expiry could impact BSE's earnings by 41%. This could increase to 50% in the event of a same-day expiry. For Nuvama, the numbers stand at 24% in both scenarios.

Jefferies added in its note that it will be closely keeping an eye on Friday's SEBI Board Meet.

Sources have told NDTV Profit that a number of topics could be on the agenda, including lowering the entry threshold for large Alternative Investment Funds (AIF) schemes and a relief in IPO norms for big companies.

Whether or not SEBI decides to clarify speculation on the expiry cycle of index derivatives remains to be seen.