BSE stock gets lift from NSE IPO visibility

The stock jumped from ₹2,902.7 to ₹3,980.15 apiece between 13 September and 24 September, making it the best-performer on the Nifty Midcap 100 index over the period. On a one-year basis through 24 September, it was the third-best performer, rising 233%, after Kalyan Jewellers India Ltd (258%) and Suzlon Ltd (234%), per exchange data.

The surge this month has driven BSE well over the 12-month consensus price target of ₹2,836.83 by six out of 10 analysts tracking the stock, according to Bloomberg. The stock has four buys, two holds and one sell.

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NSE said at its AGM last month that it had filed a no-objection certificate for its IPO with the Securities and Exchange Board of India (Sebi). Separately, on 13 September, the market regulator said in an order that it was dropping charges of fraudulent and unfair trade practices against the exchange and its former management, including Chitra Ramkrishna and Ravi Narain, in the colocation case, for want of evidence .

The BSE stock gained traction post the order as the colocation case, dealing with alleged preferential access to a broker in NSE's colocation facility, was perceived to be one of the stumbling blocks in getting regulatory approval for the NSE IPO, according to market constituents. They believe the listing of NSE will add heft to the exchange space as a theme which will benefit the BSE.

“The NSE's potential listing will create more value for the exchange space, which will also work to the BSE's benefit as funds could invest more if the exchanges became a theme post the listing of India's second equities exchange," said Rajesh Palviya, VP (technical & derivatives research) at Axis Securities. “Moreover, it will have to be listed on BSE which will witness more transaction volumes on that count."

An exchange cannot list on its own platform. Currently, BSE is listed on NSE and when the latter lists, it will be on Asia's oldest exchange. Whatever volumes are generated on the counter by investors and traders will add to the transaction income of BSE.

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The other reason is creation of a level-playing field in the derivatives segment where NSE is more dominant in terms of market share.

“To curb the excessive retail frenzy in equity derivatives, a Sebi panel (Padmanabhan Committee) has recommended one weekly options expiry per exchange. This will create a level-playing field between both the exchanges," said Rohit Srivastava, founder of data Analytics firm IndiaCharts.

Currently, NSE runs four liquid weekly options expiries (Nifty, Bank Nifty, Nifty Midcap Select and Finnifty), while BSE runs two (Sensex and Bankex). If the panel recommendations are adopted by Sebi at its board meeting on 30 September, it will result in NSE opting for Nifty and BSE option for Sensex. This again could work to BSE's advantage although NSE leads in cash and derivatives volumes.

For instance, based on both the exchanges combined average daily cash turnover of ₹135.59 trillion in August, NSE held 93% market share and BSE 7%. Similarly on total average daily turnover of ₹501 trillion in August, NSE held 75% market share and BSE the rest.

Dhiraj Sachdev, CIO of family office fund Roha Asset Managers, is bullish on the listed exchange ecosystem as he expects the “rising equity culture" to be driven by GenZ which is taking to investing in a significant way. The listing of NSE, he said, will add “heft" to the listed exchange ecosystem players.

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