Motilal Oswal has upgraded BSE shares to 'Buy' with a target price of ₹4,000, citing a favorable change in regulatory policy. SEBI will restore the volume-weighted average price settlement for index derivatives from December 7, which is expected to boost trading activity. Investors are tracking how this shift impacts the exchange's market share and overall profit margins.
The Securities and Exchange Board of India (SEBI) has announced a policy change that is expected to provide relief to the derivatives market. Starting December 7, 2026, the regulator will restore the volume-weighted average price (VWAP) settlement for index derivatives. This decision marks a partial reversal of recent rules surrounding close-auction sessions, which had previously been blamed for curbing proprietary trading and reducing overall volumes on the exchange.
Following this announcement, Motilal Oswal has upgraded its rating on BSE shares to 'Buy' with a target price of ₹4,000. Brokerage analysts believe this change will act as a catalyst for volume recovery. Trading data shows that while BSE experienced a sharp decline in volumes during August 2026, the trend has started to improve, with volumes rising by 49% by late October compared to the earlier slump.
The financial outlook for the exchange remains strong, supported by diversified revenue streams. BSE’s EBITDA margin has crossed 65%, with projections pointing toward 70% in the near term. Key segments like the Star MF platform continue to drive growth, processing 245 million transactions every quarter. Additionally, the exchange’s co-location business provides a stable revenue base, earning roughly ₹48 crore every three months. Beyond the derivatives segment, BSE has also expanded its footprint in the cash market, where its share has increased from 7% to 9%.
Despite the optimism, the exchange remains sensitive to regulatory developments. The stock price has been volatile throughout 2026, largely reacting to SEBI’s strict oversight on derivative trading and speculation. While the upcoming rule change is viewed as a positive development, the long-term performance of the exchange will depend on its ability to sustain trading volumes in a highly competitive environment against the National Stock Exchange.
Investors should monitor the trading volume trends after the new settlement rules take effect on December 7. The sustainability of profit margins and the company's ability to maintain its market share in the cash and derivatives segments will be the key indicators to track in upcoming quarterly results.