BSE Shares Climb 4.6% Following Motilal Oswal Upgrade to 'Buy' with ₹4,000 Target

Shares of the Bombay Stock Exchange (BSE) rose 4.59 per cent on Monday, reaching an intraday high of ₹3,379.30 on the National Stock Exchange (NSE) before trading at ₹3,370.50 at 12:21 pm. The upward movement followed a stock upgrade by brokerage firm Motilal Oswal to a 'buy' rating, accompanied by a target price of ₹4,000.

Motilal Oswal's upgrade is driven by an expected recovery in derivatives volumes. This anticipated recovery is supported by the partial reversal of the Closing Auction Session (CAS) framework and potential activity gains in the cash-market following the listing of the NSE. The brokerage projects that derivatives trading volume recovery, improving market share, and business growth will support BSE's earnings.

Data cited by the brokerage shows that BSE's futures and options (F&O) notional average daily traded turnover (ADTO) grew by 85 per cent in October 2026 month-to-date. This follows a 34 per cent month-on-month decline after the CAS reset in August 2026. The partial reversal of CAS, scheduled to take effect on December 7, 2026, is identified as a regulatory catalyst for volume recovery beyond current volatility-driven increases.

Motilal Oswal estimates BSE’s FY27 ADTO will reach ₹216 trillion, marking a 16 per cent year-on-year growth. BSE has captured a market share of over 30 per cent in premium turnover. The premium-to-notional ratio has risen to roughly 14 basis points from 6-7 basis points in 2023-24, compared to over 20 basis points for the NSE. The brokerage suggests that convergence in this ratio, driven by institutional participation and longer-dated contracts, could offer additional earnings upside.

In the cash segment, BSE's market share has risen from approximately 7 per cent to around 9 per cent. Motilal Oswal highlighted the NSE’s listing and the opening of its lock-in in March 2027 as catalysts for increased cash-market turnover. Smart-order routing and platform participation are also expected to sustain cash-market activity. BSE's average daily traded turnover is projected to grow at a compound annual growth rate (CAGR) of 30 per cent between FY26 and FY28.

Additional growth drivers include the BSE Star MF platform, which saw quarterly transactions scale from 12 million in the first quarter of FY20 to 245 million in the second quarter of FY27, generating over ₹800 million in quarterly revenue. Co-location contributes ₹450-480 million per quarter, maintaining headroom for capacity and pricing.

BSE’s operating model has demonstrated profit growth potential as revenue scales. The exchange's EBITDA margin expanded to over 65 per cent in FY26 from 9 per cent in FY21, with expectations to reach 70 per cent. The brokerage forecasts a profit after tax (PAT) CAGR of approximately 27 per cent between FY26 and FY28, alongside a revenue CAGR of 23 per cent. Regulatory costs, representing 55 per cent of operating expenses, provide insulation against volume slowdowns.

Consequently, Motilal Oswal raised its revenue estimates by 8 per cent and 10 per cent for FY27 and FY28, respectively, and increased its PAT estimates by 10 per cent for FY27 and 12 per cent for FY28. Sustained volume recovery and an improving premium-to-notional ratio could potentially drive a further 20 per cent increase in estimated FY28 PAT.

"The upgrade of BSE stock by Motilal Oswal highlights how regulatory adjustments, such as the partial reversal of the Closing Auction Session, can directly impact market sentiment and trading volumes. For businesses and investors in the financial sector, this demonstrates how operational efficiency, platform diversification—such as the Star MF platform—and strategic market positioning are crucial for driving long-term margin expansion and sustainable revenue growth." — Dr. Shishir Gupta, Founder & CEO, StartupLanes