Foreign exchange firm Goldman Sachs has started coverage on Bombay Stock Exchange (BSE) Ltd. ‘neutrality‘ average and target price of Rs 5,060. The ratio represents a one percent decline from the stock’s previous close. According to the brokerage, while the BSE is poised to benefit from the strong development of Indian markets, the current valuation has reached a point where the risk reward seems limited.
Goldman Sachs noted that the stock is trading near highs, in line with global peers. The strong earnings growth of Indian listed companies and the 11 percent compound annual growth rate (CAGR) in the average daily revenue (ADT) have been highlighted as key headwinds for the company.
The potential for margin expansion in the options segment
The brokerage stressed that the change in options issuance could significantly increase profits. Lower write-off costs can improve EBITDA margins by 10 percent and improving return on equity (RoE) by 5 percent. In addition, the firm projects that BSE’s market share in the index options segment may increase 17%.
A different view of other brokerages
Earlier, Jefferies downgraded the BSE shares to ‘Underperform’ from ‘Hold’, citing negative risk-reward volatility despite raising the price target to Rs 3,500. The downgrade followed a sharp rally in BSE stocks after SEBI introduced new regulations for F&O markets, raising expectations for market share gains.
Stock performance and analyst recommendations
BSE shares, which have more than doubled in the past year, ended Friday’s session at Rs 5,123.80, marking changed to -1.56% for the week. With a market capitalization of over Rs 69,000 crore, the stock’s Relative Strength Index (RSI) of 45.5 suggests no overbought or oversold conditions.
Of the nine analysts covering BSE, five recommend ‘Buy’, while two each have ‘Hold’ and ‘Sell’ ratings.
With valuations nearing highs, BSE stocks seem to be giving limited gains. While the drivers of growth have not changed, the stock’s alignment with global benchmarks is showing investor caution.
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