Goldman Sachs has revised its target price for BSE to ₹4,880 from ₹5,650, maintaining a ‘Neutral’ rating on the stock. The downgrade comes amid concerns over lowering industry options penetration, a factor that could weigh on trading volumes and overall revenue growth for the exchange.
The brokerage has trimmed its earnings estimates for BSE across multiple financial years, with FY25/FY26/FY27/FY28 EPS projections reduced by 1%, 14%, 12%, and 11% respectively. This revision reflects concerns that regulatory changes could have a more pronounced impact on BSE’s options segment, which has been a key revenue driver in recent quarters.
Stock Under Pressure Following Regulatory Developments
BSE’s stock has already seen a sharp correction of around 16% over the past two trading sessions, as investors react to the potential implications of new regulations. Goldman Sachs believes the recent price decline largely reflects the near-term risks associated with the proposed rules. However, it also warns that further regulatory action could introduce additional uncertainties, impacting the exchange’s long-term growth trajectory.
Goldman Sachs notes that the market was not expecting such a development, which adds to the overall uncertainty regarding BSE’s earnings outlook.
What Lies Ahead for BSE?
Despite the near-term challenges, Goldman Sachs acknowledges that BSE remains a key player in India’s financial markets, benefiting from rising retail participation and increased trading activity across multiple asset classes. However, the brokerage maintains that the final regulatory outcome is still uncertain, and this lack of clarity could continue to weigh on investor sentiment.
The brokerage also highlighted that BSE’s strategic initiatives, such as expanding its derivatives segment, improving liquidity, and enhancing product offerings, could help mitigate some of the potential risks. However, until the final regulatory guidelines are confirmed, the firm prefers to remain cautious on the stock, as the regulatory overhang could limit near-term upside.
Goldman Sachs advises investors to monitor upcoming regulatory developments closely, as any favorable adjustments to the proposed rules could potentially lead to a re-rating of BSE’s valuation. However, until greater clarity emerges, it maintains its ‘Neutral’ rating with a reduced target price of ₹4,880.
