Fundamental Analysis of BSE Ltd

09 November 2022
5 min read
Fundamental Analysis of BSE Ltd
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Founded in India, BSE Limited (BSE) operates in the stock exchange. BSE offers a transparent market for trading in equity, debt instruments, derivatives, and mutual funds. In addition, the company conducts business through its segment for Facilitating Trading in Securities and other related ancillary Services.

Additionally, it has a platform for trading small- and medium-sized business equity (SME). For trading corporate bonds, commercial papers, certificates of deposit, government securities, treasury bills, state development loans, municipal bonds, and securitized debt, it provides a request for quotes (RFQ) platform, which is a Web-based online trade execution and settlement platform.

For individual investors to directly participate in the auction of government securities, State Development Loans (SDL), and treasury bills issued by the government of India, BSE also introduced a mobile application called BSE Direct and a Web-based platform. BSE Technologies Private Limited and BSE Institute Limited are two of its subsidiaries.

The Bombay Stock Exchange, also known as BSE, is the oldest in Asia and not just in India. Founded in 1875, this company has been providing high-speed trading instruments like equity, debt, mutual funds, currencies, and derivatives. Premchand Roychand founded the organization known as The Native Share & Stock Brokers Association but later changed its name to BSE.

The Central Government of India first acknowledged BSE as a premier stock exchange in 1957. The Sensitive Index, also known as SENSEX, is the nation's first equity index and the BSE's benchmark index. It keeps tabs on the 30 most important and most prominent BSE-listed businesses. These businesses, which span over ten different industries, are trendsetters for the Indian economy and the stock market.

BSE Ltd., listed in 2017, is not just a multi-bagger stock but a cash cow for its investors. On a year-to-date basis, the stock has yielded a 206.98% return in one year. Moreover, the stock is continuously registering fresh lifetime highs since October 2021 and continues to do so as well by continuing to make big bullish candles one after another. 

Currently, BSE Ltd finds itself in a sweet spot operationally. However, things weren’t always this smooth. It is one of the world’s leading stock exchanges and the fastest (with a trade speed of 6 milliseconds). However, it was dragged down to Rs 275 in March 2020. This is at a time when the outbreak of the pandemic shattered the stock markets globally. 

Since then, this exchange has continued to add to its track record with solid innovation. BSE has expanded its State-of-the-art infrastructure and technology and established interactive relationships with the market participants. The resurgence in the stock was predominantly driven by the company's diversified yet unique business model.

Decoding BSE’s Business Model

Belonging to the finance sector, BSE Ltd owns and manages the Bombay Stock Exchange. It provides transparent market and trading opportunities across various segments, including equities, debt, derivatives, currency, and commodities.

It has close to 6,000 listed companies. In addition, BSE provides a wide range of services to capital market participants, including clearing settlement, risk management, market data services, and investor education and certifications.

Why Is The Stock Of BSE On The Rise?

  • Bonus Issue

BSE is one stock that doesn’t lack volumes and reacts actively to every small development in the company. On December 28, 2021, the stock opened 10% higher to Rs 2,000 per share against its previous close of Rs 1,835 and continued to boom.

This sharp spike was propelled by the BSE Board’s decision to consider and approve the quarterly and 9-month unaudited financial statements. And also to consider bonus issues of shares. The market picked this development as a positive cue because bonus issues will drive stock liquidity and make it cheaper for investors in terms of acquisition cost. 

  • Rollover to T+1 Settlement

All transactions in all categories of equity securities and all fixed-income securities listed on the BSE are to be settled on a T+2 basis (w.e.f. from April 1, 2003). The settlement calendar details the times of various settlement-related events and is created in advance by BSE and distributed to market participants. Rolling settlements involve the settlement of trades made on a specific day after a predetermined number of business days.

A T+2 settlement cycle means that the exchange of money and securities between buyers and sellers as part of the final settlement of transactions made on T, or the trading day, happens on the second business day (excluding Saturdays, Sundays, bank holidays, and Exchange trading holidays) following the trading day.

Likely Positive Triggers For BSE

In addition to the bonus and T+1 settlement, there are a few other positive triggers for BSE. 

One, BSE is a net zero-debt company. And debt-free companies with such attractive valuations are hard to spot. Two, BSE Ltd holds a 20% stake in CDSL. And CDSL, being just one of two depositories in India,  is also performing wonderfully in terms of its performance and shareholder returns. Lastly, NSE’s Initial Public Offer (IPO) with a valuation of whopping Rs 87,000 crores is around the corner. 

With just over 2000 companies listed, NSE has been awarded a valuation of Rs 87,000 crores. At the same time, BSE has a modest market capitalization of Rs 8,888 crores. This is likely to present a cheaper valuation for BSE. This could lead to investors acquiring more of BSE. 

Likely Negative Triggers For BSE

The stock shows no signs of weakness and is trading far from its recently registered all-time high of Rs 2,373. However, one evident concern is the declining shareholding trend of both FIIs and DIIs.This amounts to a net decline in shareholding of 3.56%.

Much of this is due to an increase in the interest rates in the US. And also the beginning of tapering of the economic relief packages. Similar is the case with DII’s, where we saw a marginal decline of 0.03% in the shareholding.

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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