BSE share price slips 8% from record high; analysts cite valuation risks. Buy, sell or hold?

BSE share price declined over 4% on Thursday, extending losses for the second session, as investors booked profits following a sharp rally. BSE shares fell as much as 4.24% to an intraday low of ₹2,760.00 apiece on the NSE.

The fall in BSE share price today follows a 4% drop in the previous trading session. BSE share price hit a record high of ₹3,030 apiece on 10 June 2025, and is down more than 8% from that level.

BSE shares came under selling pressure after being placed under the Additional Surveillance Measure (ASM) framework by the National Stock Exchange to curb speculative activity. The move mandates a 100% margin requirement for trading in BSE shares, which are listed on its privately held rival exchange, NSE.

The action follows a nearly 140% rally in BSE’s share price since its March 2025 low, driven by increased traction in India’s equity derivatives market and optimism surrounding NSE’s potential initial public offering (IPO).

At a market capitalisation of around ₹1.13 lakh crore, BSE shares are trading at a premium to its peers in the BFSI sector. Analysts have turned cautious on the BSE stock, citing elevated valuations and associated risks.

Valuation Concerns Weigh on Sentiment

BSE is currently trading at a stretched valuation, with a projected FY27E price-to-earnings (P/E) multiple of 35.1x—significantly higher than sector averages. Analysts at Arihant Capital believe such valuations are unjustified given the company’s reliance on external factors and exposure to market volatility.

“Despite strong financial performance in FY25, BSE Ltd.’s reliance on volatile trading volumes, high settlement costs, and stretched valuations make it a risky investment at current levels. The company’s growth prospects are overshadowed by macroeconomic uncertainties and competitive pressures,” Arihant Capital said in a note.

Fundamentals and Risks

BSE’s equity derivatives segment has been a key growth driver, with average daily premiums turnover rising 293.3% year-on-year. However, this growth remains highly sensitive to broader market sentiment and volatility. The fluctuations seen in Q4 FY25 underscore the instability of this revenue stream, Arihant Capital noted.

Additionally, a significant portion of clearing charges is paid to National Clearing Corporation Ltd. (NCL), impacting BSE’s profitability. While negotiations are underway to reduce these costs, the outcome remains uncertain, posing a risk to margin expansion.

The brokerage also flagged concerns about external headwinds, including global geopolitical tensions, which could weigh on BSE’s performance despite the broader resilience of Indian capital markets.

Moreover, the proposed dividend payout of ₹23 per share (28.4% of annual profits) reflects strong financials but raises concerns about capital allocation. Continued infrastructure investments may strain cash flows, limiting flexibility for future growth initiatives, said the brokerage report.

Given these concerns, Arihant Capital recommends a ‘Sell’ rating on BSE shares and suggests investors to consider reallocating to more stable and diversified opportunities within the BFSI sector.

Technical Outlook

BSE share price is exhibiting signs of topping out near ₹2,980, with the stock significantly extended from its daily 50-day and weekly moving averages, noted Anshul Jain, Head of Research at Lakshmishree Investments.

“Such overextension often precedes a mean reversion phase. Given the current setup, a pullback towards the previous swing low of ₹2,385 appears highly likely. Traders should exercise caution at elevated levels and watch for bearish price action confirmation before initiating short positions,” Jain said.

Echoing a cautious view, Ruchit Jain, Vice President – Equity Technical Research at Motilal Oswal Financial Services, pointed out that following a sharp rally of nearly 140%, the momentum indicators have moved into overbought territory, suggesting the possibility of a time-wise correction.

“We may see a pullback in BSE shares upto 20-day exponential moving average (DEMA) which is placed at ₹2,650 level. A breach of this support could open the door for further downside towards ₹2,500,” he said.

At 12:00 PM, BSE share price was trading 4.08% lower at ₹2,764.90 apiece on the NSE. 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.