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BSE shares slump after India’s new closing auction session disrupts trading
Options turnover and volumes fell after the new closing auction system began on 3 August, with BSE premium turnover dropping 18% and contracts down 20% for key expiries.
India’s new closing auction session has added friction to trading at the Bombay Stock Exchange, pressuring BSE Ltd’s shares and clouding the growth outlook for Asia’s oldest exchange operator, according to LiveMint Markets. LiveMint Markets cited that BSE shares have fallen more than 9% in August so far, as options turnover and volumes declined after the system was introduced on 3 August. The regulator, the Securities and Exchange Board of India, has said the mechanism is here to stay despite complaints. Several analysts have adjusted their stance, LiveMint Markets reported. Jefferies cut BSE to underperform this week, the first sell call on the stock since October, while Nuvama reduced the shares to hold and slashed its price target by 20%. Even so, LiveMint Markets noted that buy ratings still remain from more than half of the 18 analysts tracking the company, and the 12-month consensus price implies about 20% upside.
LiveMint Markets also pointed to trading data showing declining activity around the transition. BSE’s average daily premium turnover fell 18% for the 6 August and 13 August expiries compared with the average for weekly expiries in July, and the number of contracts traded dropped 20% during the period.
Additionally, LiveMint Markets said Nuvama analyst Prithvish Uppal argued there is no near-term trigger given BSE’s contract market share of about 50% and “incremental levers” running out, and he flagged new pressure from the Reserve Bank of India’s tightening of funding rules for proprietary trading. Jefferies analyst Supratim Datta said BSE could consider measures like raising options fees and messaging fees for its co-location facility, but also expects turnover to recover from October once auction issues are resolved, with market share potentially staying flat in fiscal years 2028 and 2029.