BSE shares rebound nearly 5% after six-day losing streak; legal and regulatory challenges persist

Shares of BSE Ltd surged almost 5 percent in intra-day trading on Tuesday, snapping a six-session losing streak. The stock had declined nearly 27 percent over the past six sessions, weighed down by legal uncertainties and regulatory concerns.

The sharp losses came after a Mumbai court directed authorities to file a First Information Report (FIR) against former SEBI chairperson Madhabi Puri Buch, two BSE officials, and others over alleged irregularities in granting listing permissions to a company in 1994. Meanwhile, concerns over proposed regulatory changes by SEBI have also contributed to the stock’s volatility.

Legal Troubles and BSE’s Response

The FIR pertains to an application seeking an investigation into alleged listing irregularities involving Cals Refineries Ltd in 1994. However, BSE argued that the officials named in the case were not in their respective positions at the time of the listing and had no involvement with the company.

In response, BSE termed the application as “frivolous and vexatious in nature,” asserting that the court allowed the request without issuing a notice or giving the exchange an opportunity to present its case. The exchange emphasized that it has initiated necessary legal steps to address the matter.

“As a responsible market institution, BSE remains committed to upholding regulatory compliance and ensuring transparency,” the exchange stated.

SEBI also defended its stance, stating that the named officials were not holding their respective positions at the time of the alleged irregularities. It further alleged that the applicant has a history of filing frivolous lawsuits, some of which have previously been dismissed with penalties.

“SEBI will take appropriate legal steps to challenge this order and remains committed to ensuring due regulatory compliance in all matters,” the regulator stated.

Goldman Sachs’ Rating and Other Brokerages

Adding to the stock’s volatility, global brokerage firm Goldman Sachs recently lowered its target price for BSE shares from ₹5,650 to ₹4,880, citing concerns over SEBI’s proposed regulatory changes. The brokerage firm maintained a ‘neutral’ rating on the stock and flagged potential risks to trading volumes.

Goldman Sachs highlighted that nearly 70 percent of BSE’s average daily turnover is driven by proprietary traders, whose activity could be impacted by SEBI’s proposed regulations. SEBI’s consultation paper, issued on February 24, suggested a shift in how open interest (OI) in equity derivatives is calculated. The regulator proposed moving from the current notional terms approach to a future-equivalent or delta-based methodology to curb market manipulation and align derivatives risk with cash market liquidity.

The brokerage firm estimated that these regulatory adjustments could lower the industry’s options premium to cash equity turnover ratio from 0.4x to 0.3x. Consequently, the share of index options contracts in the average daily premium traded is unlikely to exceed 30 percent, compared to 22 percent in February.

HDFC Securities revised its estimates for BSE, cutting notional turnover projections by approximately 40 percent for FY26E while increasing premium realization estimates by around 70 percent. This adjustment led to a 2 percent rise in estimated revenue from options. The brokerage expects BSE’s EBITDA margin to improve from 53 percent to 63 percent in FY26E. Consequently, it raised revenue estimates by 2-3 percent and EPS projections by nearly 18 percent for the same period. HDFC Securities noted that the ongoing decline in notional turnover within the options segment, following the implementation of F&O regulations in November 2024 and an increase in lot sizes, is likely to support BSE’s margins and profitability.

Meanwhile, Motilal Oswal Financial Services highlighted that BSE’s regulatory costs paid to SEBI and clearing and settlement expenses paid to NSE remain tied to notional turnover or the number of contracts traded.

Stock Performance and Market Trends

BSE shares rose as much as 4.7 percent in Tuesday’s session, reaching a high of ₹4,562.90. However, the stock remains under pressure, having lost 3 percent in the first two trading sessions of March. In February, the scrip declined by 12.6 percent, following a marginal 0.4 percent drop in January.

Despite the recent correction, BSE has been a multibagger stock over the past year, gaining 101 percent. Over the last five years, the stock has delivered a staggering return of 3,261.99 percent. However, it has corrected 25 percent from its peak of ₹6,133.40, recorded on January 20, 2025.

While Tuesday’s rebound offers some relief to investors, BSE’s stock remains under pressure due to legal uncertainties and regulatory risks. The exchange’s legal battle and SEBI’s proposed changes to proprietary trading norms continue to weigh on sentiment. Investors will closely watch further developments on these fronts, along with BSE’s efforts to navigate ongoing challenges in the regulatory landscape.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.