Shares of Asia's oldest stock exchange, BSE Ltd, surged 4.9% on Tuesday to Rs 5,408.95 on the National Stock Exchange (NSE) after brokerage firm Jefferies upgraded its rating on the bourse to ‘hold’ from ‘underweight’ and significantly increased the target price to Rs 5,250 from Rs 3,500 earlier.The upgrade reflects Jefferies' optimism about potential earnings upgrades for BSE Ltd, despite the adverse impact of recent measures by the Securities and Exchange Board of India (Sebi) on the derivatives market. According to Jefferies, Sebi's new futures and options (F&O) rules, which mandate larger lot sizes, initially caused a sharp 70% drop in options contract volumes. However, the decline in premiums has been less severe than expected, falling by less than 10% month-to-date in January against the firm’s anticipated 25% decline, the brokerage noted.Jefferies said that while the measures have pressured discount brokers, whose volumes may decline by over 40%, they could also drive structural changes in pricing. The average ticket size in the industry has reportedly tripled in the second week of January compared to November 2024, reflecting the adaptation to higher lot sizes.BSE Ltd is poised to benefit from these shifts, as exchanges may witness earnings upgrades driven by the evolving market dynamics, the brokerage noted. Analysts expect brokers to implement price hikes, which could further stabilize trading volumes.The Sebi measures are seen as a long-term effort to bring discipline and transparency to the F&O market. Jefferies' positive outlook on BSE suggests the exchange is well-positioned to navigate these regulatory changes and capitalize on emerging opportunities in the evolving trading landscape.Additionally, on January 13, global brokerage Goldman Sachs initiated coverage on the stock exchange with a 'neutral' stance, assigning a target price of Rs 5,060.Also read | Goldman Sachs analysts answer 5 investor questions before Union Budget(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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