Shares of BSE Limited snapped a multi-day losing streak on Wednesday, rising over 2% in morning trade as buyers stepped in following sharp recent declines. The stock recovered from the day’s low of Rs 3,292 to touch a high of Rs 3,395. However, sentiment around the stock exchange remains cautious following back-to-back downgrades from major brokerages this week.

Nuvama downgraded its rating on the shares of BSE to Hold and slashed its target price to Rs 3,240 apiece from Rs 4,090 apiece, implying around 3% downside potential from the stock’s previous close of Rs 3,332 apiece. The brokerage highlighted three main headwinds for the stock exchange that converge in FY27.

The newly introduced closing auction session (CAS) has created confusion among traders, leading to lower participation. Nuvama noted that BSE’s index option premium volumes (ADPTV) of Rs 18,100 crore are the lowest since January 2025. Earlier, option premiums decayed predictably into expiry, enabling repeated participation through short-duration trades. CAS introduces uncertainty in final settlement due to auction-based closing, reducing the predictability of this decay path. This weakens theta-harvesting strategies and impacts seller interest, causing BSE expiry-day contracts to fall 33% versus 24% for non-expiry contracts.

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Secondly, RBI's bank guarantee norms arrive right as the CAS impact could heal. Tighter collateral requirements may raise capital intensity for intermediaries, reducing turnover efficiency in high-frequency strategies that drive contract volumes, which could cap recovery into FY28.

Lastly, market share gains appear to be nearing saturation. Nuvama highlighted that BSE’s contract share of nearly 51.5% is already high, while ADPTV share remains lower at around 36% due to a lower mix of non-expiry day contribution. This gap is structural and limits incremental upside from further market share gains. Consequently, Nuvama cut BSE’s EPS estimates by 6.3% for FY27 and 15% for FY28, though it noted a recovery in VIX towards 16 to 18 could materially lift premium per contract.

Nuvama's downgrade comes right after Jefferies downgraded the counter to Underperform from Hold and trimmed its target price to Rs 2,940 from Rs 3,520. Jefferies flagged risks to BSE’s revenue from domestic proprietary traders, who account for nearly 50% of notional turnover, citing structural headwinds from the STT hike, RBI’s bank guarantee norms, and the Closing Auction Session.

BSE shares have fallen nearly 4% in a week and over 5% in a month, although the stock is up nearly 29% in 2026 so far.

After touching a 52-week low of Rs 2,021.50 apiece in September last year, the stock rallied strongly to hit a 52-week high of Rs 4,446.80 in May this year. The stock has since corrected from those peaks, supported by a daily volatility of 2.76% and a total market capitalisation of over Rs 1.37 lakh crore.

Over the long term, BSE shares have delivered massive returns, surging more than 1,075% in three years and over 2,500% in five years. The company currently trades at a price-to-earnings (P/E) ratio of 47.82.

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