BSE Share Price: The proposal for change made by the market regulator Securities and Exchange Board of India (SEBI) regarding market related risks has given a severe blow to the shares of Bombay Stock Exchange. The reason for this is that global brokerage firm Goldman Sachs has cut the target price of BSE by about 14 percent due to this proposal. Due to this cut, the shares fell drastically and currently it is at Rs 4,473.05 on BSE with a fall of 3.47 percent. Intra-day it had come down to Rs 4,395.70 with a fall of 5.14 percent.
What has SEBI proposed?
SEBI has proposed a new method to measure market risk in a consultation paper dated February 24. SEBI has planned to change the method of calculation of open interest (OI) in equity derivatives. Currently, notional value is used for calculation of open interest. SEBI plans to use futures equivalent or delta-based open interest calculation instead. OI is the total number of derivative contracts in the market of an asset. SEBI believes that this will reduce manipulation. Apart from this, SEBI has also proposed changes in risk-management for the index derivatives segment. According to a market expert, this will lead to a sharp decline in the case of low OI being seen on the positions of large entities holding large positions. This will curb manipulation in the cash and derivatives market and will also reduce volatility.
What does Goldman have to say about BSE?
Goldman says that SEBI's proposal will reduce the industry's options premium to 0.4x to 0.3x compared to cash equity turnover. Due to this, it will be difficult for the average daily premium traded on index options contracts to cross 30 percent of the market share. This figure was 22 percent in February. In such a situation, the brokerage firm believes that the activity of proprietary traders may decrease and its impact may be seen on BSE shares because about 70 percent of the average daily turnover of BSE comes from them. Considering all these things, the brokerage firm has reduced the target price from Rs 5,650 to Rs 4,880. However, the neutral rating has been maintained.
Disclaimer: The advice or views expressed on Moneycontrol.com are the personal views of the experts/brokerage firms. The website or management is not responsible for the same. Moneycontrol advises users to always seek advice from certified experts before making any investment decisions.
