BSE’s notional futures and options (F&O) average daily turnover (ADTO) fell 35% in August 2026 from the April-July average following stricter lending norms for proprietary traders and the implementation of the close-auction session (CAS) framework. While volumes have rebounded sharply since then, Motilal Oswal Financial Services expects the recovery to normalise as market volatility eases, with a partial reversal of CAS rules providing a fresh regulatory catalyst.
“Volume reset over; growth path looks better ahead,” the brokerage said in its report, forecasting FY27 notional F&O ADTO of ₹216 lakh crore, up 16% year-on-year.
BSE’s F&O ADTO recovered 6% month-on-month in September after the August reset, before surging 49% month-on-month as of October 20, supported by heightened market volatility which led to a spurt in volumes.
The Securities and Exchange Board of India (Sebi) has decided to restore volume-weighted average price (VWAP) settlement during the last 30 minutes of trading for index derivatives from December 7. The partial reversal addresses changes that affected traders and high-frequency trading firms following the CAS implementation in August.
“While the Oct’26 data has shown a strong recovery in volumes driven by market volatility, we believe that the CAS reversal would lead to volume normalization,” Motilal Oswal said.
The brokerage sees scope for further upside to its volume estimates if the recovery sustains. BSE’s year-to-date FY27 ADTO stood at ₹213 lakh crore, according to the report.
Market-share gains offer further upside
BSE has achieved around 50% market share in index options notional turnover within three years of relaunching its derivatives segment in 2023. Its share of premium turnover has also crossed 30%, leaving room for further expansion, as per the report.
The premium-to-notional turnover ratio has risen to around 14 basis points from 6-7 basis points in 2023-24, but remains below the more than 20 basis points recorded by the National Stock Exchange (NSE).
“Further convergence, driven by institutional participation and longer-dated contracts, can deliver meaningful earnings upside over and above volume growth,” the brokerage said.
The mix of derivatives participants has also diversified. Proprietary traders accounted for 48.9% of BSE’s derivatives turnover, down from 58.4% in April 2025, partly cushioning the impact of stricter lending norms.
Cash market and other businesses add growth drivers
BSE’s cash-market share has increased from around 7% to 9%. Motilal Oswal expects the proposed NSE listing and the opening of its shareholder lock-in in March 2027 to support cash-market turnover. It forecasts a 30% compound annual growth rate (CAGR) in BSE’s cash-market ADTO between FY26 and FY28.
The brokerage also highlighted growth in BSE’s mutual fund transaction platform, Star MF, and its co-location business.
Star MF’s quarterly transaction volumes rose from 12 million in the first quarter of FY20 to 245 million in the second quarter of FY27, generating more than ₹80 crore in quarterly revenue. Co-location contributes ₹45-48 crore per quarter, with further scope for capacity expansion and pricing improvements.
“These businesses broaden BSE’s earnings drivers beyond trading activity alone,” the report said.
Raises estimates, upgrades BSE to Buy
BSE’s EBITDA margin expanded to more than 65% in FY26 from 9% in FY21. Motilal Oswal expects the margin to reach 70%, supported by operating leverage. The brokerage forecasts a 23% revenue CAGR and around 27% profit after tax (PAT) CAGR between FY26 and FY28.
Motilal Oswal upgraded BSE to Buy with a target price of ₹4,000, based on 40 times its FY28 estimated earnings.
It raised its revenue estimates by 8% for FY27 and 10% for FY28, and its PAT estimates by 10% and 12%, respectively. The revisions reflect the strong volume run-rate, the expected benefit of the CAS reversal and the potential impact of NSE’s listing on cash-market turnover.
A sustained volume recovery and a higher premium-to-notional ratio could drive a further 20% increase in FY28 estimated PAT, the brokerage said.