BSE Ltd defies geopolitical uncertainty, surges 15% in two weeks; here is why

The Indian benchmark indices have become a major casualty of the Middle East war, as the NIFTY50 and the SENSEX fell nearly 9% since March 02. Along with the benchmark indices, the broader indices like NIFTY mid-cap and small-cap also fell nearly 10% since the war broke out.

At the stock-specific level, the index heavyweight stocks like TCS, Infosys, HDFC Bank, ICICI Bank, and Axis Bank also fell more than 5% in the same period. However, in the same period, a few stocks have bucked the broader subdued and pessimistic sentiment and posted a strong outperformance over the benchmark indices. BSE Ltd, India’s oldest stock market exchange, jumped nearly 15% in the same period. Here is why

Increased volatility

The India volatility index, which is a major gauge of volatility in the Indian markets, soared nearly 80% in the past two weeks after the conflict between Iran, Israel and the US escalated since February 28. The India ViX index shot from 13 to 25 in a few trading sessions, providing enough opportunities for traders to profit from it. Consequently, the volumes at the exchange for the derivative segment also increased. Higher volatility and increased volumes are expected to drive strong top line growth for the company during the quarter.

Sensex Next 30 approval

Amidst the gloomy market scenario, the exchange received approval from SEBI to launch derivative contracts for SENSEX Next 30 index on March 4. Currently, the BSE has two indices in the F&O segment, out of which SENSEX has weekly and monthly expiry contracts.

While, bankex has only monthly expiry contracts. With the approval for SENSEX Next 30 and Focused Midcap index, the total equity derivatives indices now jumped to four. Increased indices would help the company to garner more market share from the giant NSE.

Subdued NSE IPO buzz

The overall subdued IPO activity owing to weak investor sentiment has also impacted the NSE IPO process. Investors are now looking for the opportunity to grab amid rising volatility and volumes. BSE Ltd remains the only listed proxy play to the theme of rising volumes and turnover in such a volatile period. Hence, strong buying power has lifted the stock up nearly 16% the recent lows.

In conclusion

The rising volatility in the market is proving to be boon for the stock exchanges and the related ecosystem. The derivatives market have recently gone through structural regulatory changes, eroding the overall F&O activity in the markets. However, as the derivatives as a category matures, the participation could restore soon. Additionally, with the introduction of new exchanges, the trader community could get more avenues to trade, aiding the overall growth of the derivatives market.