“BSE under Threat? Jefferies Warns of 20-50% EPS Cuts in New Expiry Scenarios”

How will SEBI’s proposed expiry changes impact the BSE share price? Jefferies lays out four scenarios and potential earnings drops — what investors need to know.

Imagine you own a piece of a company whose revenues depend heavily on how often people trade options. Now imagine the regulator changes when those expiries happen — from weekly to fortnightly or monthly — or mandates that all exchanges settle on the “same day”. Suddenly, your income stream is uncertain.

That’s exactly what’s happening with BSE share price & earnings forecasts. Jefferies, the global brokerage, has outlined multiple scenarios around SEBI’s proposed changes to index derivative expiry cycles. Depending on how SEBI acts, BSE could face major cuts to its earnings and its growth story could get derated — even if current valuations seem “reasonable.”

In this post, let’s walk through:

• What Jefferies is saying: the expiry scenarios and their EPS/risk implications
• Why the market is watching SEBI’s board meeting closely
• What this means for investors, both in BSE and related players
• Broader sectoral ripple effects (IT, auto, etc.) that Jefferies also flagged

By the end, you’ll have a clearer picture of whether BSE is a buy, hold, or caution-flag stock right now.

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The Core: Jefferies’ Expiry Cycle Scenarios & What They Mean for BSE

What is the proposed change?

Right now, BSE and NSE have weekly expiry days for many index derivatives contracts. SEBI is considering extending the expiry cycle (i.e. how frequently these contracts expire) to fortnightly or even monthly, possibly with same-day expiry across exchanges, or separate settlement days.

These are policy/regulatory levers aimed at:

• Reducing speculation and excessive trading in short-term options
• Aligning risk exposure and ensuring more stability
• Possibly curbing volatility in markets

But change always comes with risks — especially for exchange operators like BSE whose revenue depends heavily on derivative contract volume, turnover, and expiry activity.

Four Scenarios & Their Impacts (As per Jefferies)

Jefferies has modelled several pathways of how SEBI might change expiry rules. Each scenario has different implications for BSE’s earnings per share (EPS) by fiscal year 2027. Key ones:

Scenario	Description	Estimated EPS Impact for BSE by FY27
Fortnightly Expiry, Separate Settlement Days	Derivatives expire every two weeks; settlement happens separately across exchanges	~20-35% reduction in EPS NDTV Profit+2scanx.trade+2
Monthly Expiry, Separate Settlement	Only once per month, different settlement days	EPS cut in the range of ~41-50% scanx.trade+1
Same-Day Expiry Across Exchanges	Fortnightly or monthly expiry but both BSE and NSE settle on same day	Adds severity to the earnings hit — moving towards the upper end of estimated losses NDTV Profit+1
No or Mild Change	Weekly expiry remains; or changes are implemented slowly (“glide path”)	Minimal to moderate impact; could be partially “priced in” already by the market (i.e. some drop already reflected in current share price) Moneycontrol+1

(“Separate settlement” means different exchanges have different expiry/settlement days; “same-day expiry” means both exchanges settle at the same time.)

Current Price & Valuation Context

• BSE shares are trading at a forward P/E ~38× FY27 earnings. Jefferies deems this “reasonable” under current circumstances, provided there is no material de-rating. The Economic Times+1
• But the scenarios above imply large EPS cuts — which, if realized, would force a re-valuation (i.e. share price would have to come down) to maintain the same return expectations.

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How Much Is Priced In — What the Market Believes

Markets are rarely blindsided. Let’s see what seems already “on the price”:

• There’s speculation that the shift to fortnightly expiry + separate settlement is already being partially priced in. Some analysts believe BSE options revenue FY27 could fall ~38%, leading to a ~22% drop in total revenue, and ~21% drop in net profit. Moneycontrol+2scanx.trade+2
• Stock price has shown some volatility as reports emerge, often rising when there’s doubt about immediate implementation (i.e. investors hope SEBI may hold off or delay). Moneycontrol+1
• The SEBI Board meeting of 12th September is being watched as a key event — signals from that could trigger sharp reactions. Moneycontrol+1

Key Takeaway: Some downside seems baked in, but the worst cases (monthly expiry + same-day) may not be fully priced, which means risk remains.

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BSE Share Price: How Big a Hit?

Putting together what we know:

• If EPS drops 20-35% by FY27, assuming P/E remains stable, share price would decline similarly (but likely more, because markets tend to punish uncertainty)
• Under harsher scenarios, share price might drop 40-50%+ from current levels if investors believe earnings will irrevocably be lower
• On the flip side, if SEBI adopts a mild path (say fortnightly expiry but with careful glide-in, separate days, or delays), BSE could preserve much of its earnings, causing only moderate correction

Analogies help: think of BSE like a shop relying heavily on daily sales of small ticket items. If you cut those daily sales to half or reduce visits to once in two weeks (monthly), your rent, staff, etc., still have to be paid — margins will shrink, value goes down.

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Interacting Effects: IT Sector, Auto, & Others

Jefferies isn’t only talking about BSE; there are broader themes.

• In IT services, Jefferies sees “revenue-deflation” over CY25-30 (~20%) impacting high margin streams more. That means earnings growth is going to be hard to come by. The Economic Times+1
• For auto sector, Jefferies prefers PV OEMs over CVs/2Ws, expecting stimulus from GST cuts, income tax revisions, etc. Such sectors less hit by regulatory expiry risk, more by macro and demand cycles. The Economic Times

So for investors with diversified portfolios, risks from BSE are more specific/regulatory; others are more demand, cost, or policy-driven.

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What Investors Should Do: Strategy & Precautions

Here are actionable tips, especially for people holding or considering BSE stock.

Due Diligence & Scenario Planning

• Build best / base / worst case models in your spreadsheet — what happens to your expected returns if EPS drops 20%, 35%, 50%?
• Watch the SEBI board meeting — any announcements or even hints (minutes, statements) can shift expectations sharply.

Risk Mitigation

• Diversify — don’t have too large a chunk of your portfolio in exchange stocks, especially one with regulatory exposures.
• Hedge possibilities — maybe via options (if feasible), or reduce exposure ahead of bad news.

Look For Signals

• Any communication from BSE management about fees, settlement days, revenue loss estimates
• How SEBI frames the “glide path” or whether there are consultation papers
• Volume trends in derivatives (if weekly contract turnover is falling, or premium ADTO dropping)

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Scenario Case Studies: What Has Happened in Similar Situations

Here are a couple of analogies / past cases, to give concrete sense of how markets react to expiry rule changes.

• Other exchanges abroad: When market regulators change expiry days or number of options contracts (say in US/Europe), exchanges initially report drop in volumes, fees, but then stabilize as traders adjust to new norms. There’s often a transition period of 3-6 months where uncertainty is highest.
• Earlier changes in BSE / NSE: In mid-2025, SEBI approved changing BSE’s weekly expiry day from Tuesday to Thursday (for example) to avoid overlaps. Such shifts caused short-term volatility in market share & earnings estimates. Analysts at that time flagged potential volume and profit risks. Reuters

These cases suggest that BSE may bounce back if changes are implemented thoughtfully, but shock implementation (without clarity) tends to punish share price.

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What’s Reasonable Valuation Now?

Given all the above, what makes sense for BSE share price today, and where it could be headed?

• Given current forward P/E ~38× FY27, that valuation assumes benign to moderate change – not severe earnings hits.
• If EPS falls 20-30%, the stock may still justify being in the Rs ~1,800-2,400 range (depending on margin compression, cost control) rather than more severe falls.
• Under extreme downside (monthly + same-day expiry), perhaps much lower – maybe Rs ~1,400-1,800 depending how investors price risk.

Of course, you also have to account for what BSE can do: cost cuts, new revenue streams, perhaps relief from regulator, maybe even compensation (though that is speculative).

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Key Takeaways So Far

• Jefferies identifies multiple expiry change scenarios, each with differing earnings risk — BSE faces 20-50% EPS cut potential by FY27 depending on how drastic the change is.
• Some of this risk is priced in, but worst-case scenarios still appear under-reflected.
• Valuation at ~38× FY27 earnings assumes stability; large downside risk if EPS or volumes drop sharply.

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Broader Impact & Sectoral Crossroads

Let’s zoom out: what do expiry changes mean for markets beyond just BSE?

IT Sector

• Jefferies expects revenue deflation over CY25-30, especially in high margin services. This increases risk of valuation compression. Companies like Infosys, HCLTech are considered lower risk, but others may see bigger impact. The Economic Times+1

Capital Markets Stocks (Exchanges, Brokers)

• BSE isn’t alone; other players (Nuvama, Angel One) also flagged as exposed to expiry-cycle changes. Earnings risk for Nuvama is forecast ~15-25% under some scenarios. NDTV Profit+1
• Brokers’ commission revenues, turnover, trader behaviour will shift if frequent expiries reduce.

Regulatory & Policy Uncertainty

• Important: SEBI has not yet confirmed any of the severe expiry changes. There’s speculation, consultations, but implementation is not certain.
• Investors should monitor not just announcements, but regulatory artifacts — e.g. consultation papers, feedback from market participants.

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Final Thoughts / What BSE Share Price Might Do

Putting myself in an investor’s shoes:

• Base case: SEBI adopts a moderate path (fortnightly, separate days), gives a glide period. BSE share price will likely correct down from current levels modestly — maybe 20-30%, before stabilizing.
• Downside case: More aggressive moves (monthly expiry + same-day across exchanges) or poor communication will trigger steeper fall — maybe 40-50% erosion in EPS, and share price follows.
• Upside potential: If SEBI abandons or delays major expiry changes, or if BSE is able to offset volume loss with fee hikes or cost savings, the market may rally back some losses.

As always, regulatory risk like this is binary — small signals or surprises will move markets more than fundamentals for a short window.

Call to Action

What do you think? If you were on BSE’s board, what expiry rule would you suggest to SEBI so both market stability and exchange revenue are balanced?

If you’re holding BSE stock, how much of this risk have you baked into your portfolio already? Share your view — comments and ideas are very welcome.

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