Nuvama has raised its target price on BSE to ₹3,760 from ₹3,130, citing sustained strength in index options volumes, rising market share and sharp operating leverage that drove a strong Q3FY26 performance despite the expiry swap implemented in September 2025.

Nuvama highlighted that BSE delivered an index options ADPTV market share of 29.4% in Q3FY26, up 227 basis points QoQ, which translated into revenue growth of 60.8% YoY and 16.4% QoQ. The brokerage noted that operating leverage played out meaningfully, with EBITDA margins expanding 443 bps YoY to 60.8%, driving EBITDA growth of 73.5% YoY and 11.1% QoQ.

Strong growth in other income further supported profitability, with adjusted PAT rising to ₹6.0 billion, up 71.5% YoY and 11.6% QoQ. Momentum continued into January 2026, with index option ADPTV surging 53.3% MoM, lifting BSE’s market share by another 292 bps MoM to 30.2%, underscoring the durability of volume gains even after the expiry realignment.

Index option volumes drive transaction charge-led growth

BSE’s total revenue rose to ₹12.4 billion in Q3FY26, supported by a sharp jump in transaction charges, which increased 86.4% YoY and 20.0% QoQ. This was primarily driven by higher index options activity, with ADPTV at ₹195 billion, up 125.8% YoY and 29.7% QoQ. Nuvama pointed out that BSE’s January 2026 ADPTV was already 47.8% higher than the Q2FY26 average, reinforcing confidence in forward estimates.

In the cash segment, cash ADTV improved 14.2% YoY, though it declined 4.0% QoQ to ₹76 billion, against an industry ADTV of ₹1.07 trillion. Cash market share improved 104 bps YoY to 7.2%, though it dipped 52 bps QoQ, with January 2026 market share at 7.0%.

Beyond trading revenues, BSE continued to see stable performance across other business lines. StarMF revenue grew 14.3% YoY and 4.0% QoQ to ₹726 million, supported by 20.6% YoY and 8.0% QoQ growth in orders to 217 million. Listing fees increased 12.2% YoY to ₹1.1 billion, while book building and other services declined 8.8% YoY but rose sharply 41.3% QoQ to ₹510 million. Revenue from services to corporates increased 4.4% YoY and 12.9% QoQ, while co-location revenue stood at ₹480 million, up from ₹460 million in Q2FY26.

Estimates raised; valuation reflects sustained volume strength

Given the continued strength in index options volumes, Nuvama has raised its FY26E–28E ADPTV assumptions, resulting in an increase in earnings estimates by 8.2% for FY26E, 21.9% for FY27E and 21.1% for FY28E. The revised target price of ₹3,760 implies a valuation of 45x earnings, in addition to the value of BSE’s 15% stake in CDSL.

The brokerage also noted that from September 2025, BSE contributes 5% of transaction revenue to the core Settlement Guarantee Fund, subject to a cap of 150% of the SGF requirement, which helps smooth earnings volatility arising from sudden margin or SGF changes.

Nuvama remains constructive on BSE’s earnings trajectory, pointing out that the exchange has managed to increase index option market share from 16.4% in December 2024 to 30.2% in January 2026, despite the expiry swap, reinforcing confidence in the sustainability of recent gains.

Disclaimer: The views and target price mentioned above are those of Nuvama and do not represent the views of Business Upturn. This article is for informational purposes only and should not be construed as investment advice.