This stock has delivered over 20% returns in each of the last five months

Shares of the BSE hit a new high at Rs 2,280, as they surged 5 per cent on the National Stock Exchange (NSE), extending its rally on expectation of strong earnings after the exchange’s success in the derivatives segment.

In past three months, the stock has zoomed 152 per cent, while, in past six months, it has skyrocketed 322 per cent. In last five consecutive months, the stock has given over 20 per cent returns to investors. Thus far in the month of November it has rallied 22 per cent, while in October has surged 44 per cent. In July, it soared 33 per cent, followed by 26 per cent in August and 22 per cent in September.

For July to September quarter (Q2FY24), BSE had reported four-fold jump in net profit at Rs 118.4 crore. The bourse's revenue rose 53 per cent to a record Rs 367 crore in Q2FY24 from Rs 240 crore in the year-ago period. Further, its average daily turnover in the equity segment increased to Rs 5,922 crore in the quarter under review, from Rs 4,740 crore in three months ended September 2022.

Meanwhile, the exchange has revised its transaction charges for Sensex Options, effective from November 1. After revision, transaction charges for Sensex Options will start from Rs 500 per crore for the slab of up to Rs 3 crore monthly turnover, the highest being Rs 3,750 per crore for the slab between Rs 3 crore and Rs 100 crore monthly turnover of the trading members.

BSE delivered a solid quarter with a significant beat on both the revenue and margins front. The revenue was up 46 per cent QoQ and margins expanded ~1200bps QoQ led by a surge in transaction and clearing revenue, analysts at HDFC Securities had said.

BSE traction in the derivative segment continues and it has gained ~12 per cent market share. The launch of the new BANKEX contract with a Monday expiry is scaling new heights every week and will help in further gain in market share. The go-live of large discount brokers and increase in active UCCs (~1mn vs ~10mn for NSE) is driving volume for BSE, the brokerage firm said in result update.

The brokerage firm expects the derivative segment to contribute ~10/30 per cent of BSE’s FY24/25E revenue. The rise in clearing revenue is a function of the higher number of trades in the derivatives segment and higher margin collection from members is leading to higher interest income. “We expect a revenue/PAT CAGR of ~35/44 per cent over FY23-26E, led by traction in transaction revenue,” HDFC Securities said.

Meanwhile, global brokerage firm Jefferies has initiated coverage on the BSE with a ‘buy’ rating and a price target of Rs 2,700. BSE’s success in the derivatives segment is expected to boost its earnings growth. The exchange is also seen as a beneficiary of the theme around ‘digitisation of Indian capital markets’.

“Indian exchanges are benefiting from financialisation of savings, rising equity participation (from digitisation of capital markets), growth in equities, product innovations and stable fees versus other capital market platforms. BSE can leverage macro-tailwinds along with headway into derivatives to deliver a 150 per cent earnings jump in FY24E and double it over FY24-26E,” Jefferies equity analysts Jayant Kharote and Prakhar Sharma said in a note.