Shares of BSE and Angel One Ltd came under the spotlight following SEBI’s new regulations that aim to reduce speculative retail participation in futures and options (F&O) trading.
These rules, which introduce higher entry barriers and reduce the number of available weekly options contracts, could hit the turnover volumes for brokerages like Angel One and exchanges like BSE, which rely on derivative trading volumes for a significant portion of their revenues.
Impact of SEBI F&O Curbs on Angel One
Market analysts have expressed concerns that Angel One’s turnover volumes could take a hit following SEBI’s tighter rules. According to a report by MOFSL (Motilal Oswal Financial Services), the exact impact on Angel One’s revenue remains uncertain.
However, if order volumes decline by 10% instead of the expected 16% growth, Angel One’s earnings could drop by 33%.
Key Concerns for Angel One:
- Lower Trading Volume: As retail investors face higher entry barriers, trading volumes could dip.
- Reduced Market Participation: Stricter leverage requirements may deter smaller investors, reducing market participation in F&O trading.
On the flip side, MOFSL remains optimistic about Angel One’s ability to navigate these challenges. The brokerage firm maintains its BUY rating, citing Angel One’s diversified product base, including wealth management, financial product distribution, and its robust digital transformation efforts.
These segments are expected to contribute significantly to the company’s long-term growth.
Buy, Hold, or Sell?
For long-term investors, Angel One remains a solid investment due to its focus on digital transformation and expansion into new revenue streams like wealth management and asset management. However, in the short term, investors should brace for some volatility due to lower derivative volumes.
Impact of SEBI F&O Curbs on BSE
Similarly, BSE is expected to experience minimal impact on earnings despite potential derivative volume declines. MOFSL noted that even if derivative volumes decline by 20%, the earnings impact would be limited to around 9%.
Key Points for BSE:
- Product Innovation: BSE’s efforts in launching innovative products, like Sensex expiries on different days, could help the exchange sustain its market share.
- New Revenue Streams: BSE’s investments in commodities and colocation services will serve as alternative revenue drivers, offsetting some of the losses in derivative trading.
For investors, BSE presents a balanced risk-reward profile. With limited downside risk due to diversification and innovative products, BSE remains a neutral hold for the time being.
MUST READ: SEBI Issues New Guidelines for High-Risk Derivative Trading: Key Details
Conclusion
While SEBI’s F&O curbs introduce short-term challenges for BSE and Angel One, both companies are expected to adapt through product innovation and diversified revenue streams. Long-term investors can consider holding their positions, especially as both companies can recover once the regulatory dust settles.
