Prabhudas Lilladher maintained its buy rating on BSE, but cut its target price to Rs 4,025 from Rs 4,850 after the implementation of the Closing Auction Session (CAS) led to a slowdown in derivatives volumes. The brokerage said the impact of CAS, compounded by tighter bank-guarantee norms and higher securities transaction tax (STT) on futures and options transactions, could constrain BSE’s near-term growth.

However, it remains positive about the exchange’s market position and long-term growth prospects. Meanwhile, it has reduced the valuation multiple assigned to BSE to 43 times FY28 estimated profit after tax (PAT) from 49 times earlier.

It said the stock had already corrected around 12% over the previous month as investors assessed the effect of regulatory headwinds. 36%.

Regulatory changes weigh on trading activityIndustry derivatives volumes contracted by around 6% month-on-month in August 2026 following the implementation of CAS, according to Prabhudas Lilladher. Tighter collateral requirements under the revised bank-guarantee rules and the recent increase in STT on F&O transactions are also likely to weigh on overall market growth.

The brokerage now expects activity to slow as participation from proprietary and high-frequency traders has fallen to 60% from 65% in the year-to-date period through August 2025. BSE continues to hold a 35% market share in index options on a year-to-date basis.

However, its index options volumes declined 27% month-on-month in August 2026 after the implementation of CAS, indicating a weaker near-term run rate. Index options volumes still expected to growAlthough the regulatory changes have slowed trading activity, the brokerage firm still expects BSE's index options volumes to grow 23% year-on-year in FY27 and 20% in FY28.

These projections assume that the current run rate continues through the rest of FY27 because of CAS, the STT increase, and tighter rules governing proprietary trading. The brokerage's forecasts suggest that BSE can continue expanding its index options business, although growth could be slower than previously anticipated.

Earnings estimates revised lowerPrabhudas Lilladher cut its FY27 and FY28 profit estimates by 2%-6% to account for the slowdown in derivatives activity. 7 crore in FY28.

8 crore, respectively. 8 crore and Rs 5,277 crore, respectively.

1, respectively. Current regulations do not permit an exchange to list its shares on its own platform.