SEBI’s New F&O Rules Propel BSE Shares Nearly 10% Amid Market Crash

The Bombay Stock Exchange (BSE) recently witnessed a notable surge, with its share price spiking by nearly 10%, thanks to the Securities and Exchange Board of India’s (SEBI) new regulations on the futures and options (F&O) segment. This development comes amidst an overall stock market crash, making BSE’s performance even more striking. But what are the factors behind this rally, and how will these changes influence the broader market?

Let’s break it down.

What Sparked the BSE Rally?

SEBI’s New F&O Rules

On October 3, 2024, SEBI introduced a regulatory framework for the F&O market. The rules, effective between November 2024 and April 2025, aim to control speculative trading and provide better transparency for investors. Among the key measures were:

• Limit on Weekly Derivatives Contracts: Only one benchmark index for each exchange (BSE and NSE) will be allowed.
• Increase in Contract Size: SEBI raised the minimum derivative contract value to ₹15 lakhs from the previous ₹5-10 lakhs.
• Changes in Expiry Days: NSE will no longer hold exclusive expiry rights, giving BSE three additional days to compete with its rival.

These rules, though aimed at reducing speculative trading, appear to favour BSE, providing it with more room to expand its market share in the derivatives space.

BSE Share Price Today

BSE’s share price surged to an intraday high of ₹4,235 per share, up from an opening of ₹3,800. This represents a significant leap, especially considering the broader market’s downturn, with other indices showing negative movements.

Brokerages React

Brokerage firms had mixed reactions to these changes, but the consensus seems optimistic about BSE’s ability to capitalise on the new framework.

• Motilal Oswal: Maintained a neutral rating on BSE, acknowledging that the volume impact would be minor, assuming derivative volumes drop by 20%.
• Jefferies: Lowered BSE’s EPS estimates by 10%, expecting a short-term hit from reduced speculative trading.

However, it’s worth noting that BSE’s growth potential now lies in its ability to grab more market share from NSE, leveraging the extended expiry days and higher contract sizes.

What Do the Numbers Say?

Comparative Growth

Looking beyond the immediate price movement, BSE shares have soared by 55% over the past month. The stock has hit record highs, outperforming its competitors and catching the attention of both retail and institutional investors.

This performance is particularly impressive considering the general market turmoil, with indices like Nifty and Sensex showing declines due to the broader economic uncertainties.

• Nifty: Fell by 2.12% to 25,250.10.
• Sensex: Dropped by 2.1%, reflecting the widespread market correction.

This divergence between BSE’s upward trajectory and the overall market decline highlights how specific regulatory changes can significantly impact particular stocks.

The Strategic Edge for BSE

More Expiry Days = More Volume Potential

NSE has traditionally dominated the F&O space, thanks to its monopoly over most trading days. Under the new rules, BSE will have three additional days to attract F&O traders, who were previously constrained to NSE.

This shift is a game-changer for BSE, giving it an opportunity to capture more market share from NSE. While short-term impacts on trading volumes are anticipated, many experts believe that BSE’s new advantage in expiry days could translate into increased volume and liquidity in the long run.

Premiums, Margins, and Contract Sizes

Another factor driving BSE’s stock price is the perceived less stringent margin requirements under SEBI’s new framework. While SEBI had initially proposed increasing margins by 8%, the final rules mandate only a 2% hike.

Additionally, the increase in lot sizes is lower than expected, from 3-4x down to just 2-3x, making the derivatives market more accessible for institutional players without driving away retail investors.

Key Takeaways for Investors

What’s Next for BSE?

The stock market is always dynamic, and while the recent surge in BSE shares is promising, the real test will be in how the exchange leverages the new rules to sustain its growth. Analysts will be watching closely to see if BSE can maintain its momentum and attract more institutional and retail investors to its platform.

For investors looking to tap into BSE’s potential, now might be an interesting time to follow the developments closely. As always, thorough research and consultation with financial experts are recommended before making any investment decisions.

In conclusion, BSE share price today has skyrocketed in response to SEBI’s new F&O rules. While the broader market faces challenges, BSE seems well-positioned to benefit from these regulatory changes, making it a key stock to watch in the coming months.