BSE, Asia’s oldest stock exchange, continues to capture investor attention as market volumes and product innovations sustain growth momentum. Even as the exchange faces occasional regulatory scrutiny and competition in derivative segments, its recent operational trends have surprised on the upside.

According to IIFL, expiry day swaps and settlement changes have not significantly disrupted activity levels. The market’s confidence in BSE’s structural progress remains steady, supported by resilient participation in premium products and a healthy uptick in average daily traded turnover (ADTO).

IIFL highlights that the expected expiry-related pressure on BSE’s volumes has turned out milder than anticipated. The derivative and equity delivery segments continued to hold ground even as the expiry swap mechanism settled into routine use. The smoother transition underscores the growing maturity of India’s derivative ecosystem and BSE’s ability to adapt efficiently.

This also reflects strong risk management systems and improving trader confidence — two crucial factors for sustainable exchange-driven growth in volumes.

Premium ADTO trends for BSE remain robust, which IIFL interprets as a sign of investor stickiness to its premium product offerings. Despite broader market competition, BSE’s share losses are limited, signaling that most participants continue to engage actively with its evolving product suite.

ADTO strength often correlates directly with earnings resilience, providing a buffer against cyclical headwinds. The sustained traction implies stable fee income and continued platform monetization opportunities.

IIFL notes that the current volume run-rate is 12–13% higher than FY26 estimates — a positive surprise that may lead to upward revisions in profit projections. The exchange’s ability to maintain high turnover even amid shifting derivatives dynamics demonstrates its operational strength.

Such consistency also indicates that market participants are diversifying order flow and exploring more sophisticated hedging and trading instruments on BSE. This steady activity pipeline enhances revenue visibility, making any potential re-rating plausible in the coming quarters.

At around 38x one-year forward earnings, BSE trades at a 15% discount to its two-year average valuation. This discount partly reflects investor caution over possible regulatory tightening. However, IIFL believes much of this risk is already priced in, and clarity from the regulator could unlock further upside.

In a market where sentiment quickly swings based on compliance updates, even partial regulatory easing could serve as a re-rating catalyst. The structural liquidity expansion in India’s capital markets continues to provide strong tailwinds to exchange businesses like BSE.

BSE’s underlying operational resilience, higher ADTO levels, and modest valuation discount make it an interesting candidate for renewed investor attention. While regulatory clarity remains the key near-term trigger, strong volume growth offers a safety cushion.

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