Broking stocks end mixed after Sebi’s new F&O framework tightening
Source: Business Standard
Shares of BSE, the only listed equity bourse, rose 3 per cent, while Angel One, a leading discount broker, jumped 4.5 per cent, even as the market regulator, the Securities and Exchange Board of India (Sebi), announced tighter derivatives trading rules, which are expected to dent volumes.
Shares of other listed brokerages fell as investors digested the impact of the stricter trading rules. Shares of ICICI Securities fell 2.3 per cent, 5paisa Capital fell 2.9 per cent, Aditya Birla Money declined 3.5 per cent, and Geojit Financial Services dipped 1.7 per cent.
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The gains in BSE and Angel One came as analysts’ reports suggested a less-than-anticipated impact on their earnings and highlighted ways to mitigate the effect of the new norms.
Sebi has introduced higher entry barriers and increased margin requirements, along with a slew of other measures, to control the rising retail frenzy in the futures and options (F&O) market.
Analysts and market experts expect a clearer picture after November 20, when most of the changes take effect. However, they anticipate BSE to be less impacted than market leader the National Stock Exchange (NSE).
Shares of BSE closed 3 per cent up at Rs 3,980 apiece after rallying as much as 8 per cent in intraday trade. BSE has only two products with weekly expiry compared to four from NSE.
“We believe NSE’s option premium turnover could be impacted up to 40 per cent, while that of BSE by 20 per cent. However, given the recent tariff increase, the impact on earnings would be lower – we estimate a 20 per cent impact for NSE and 5 per cent for BSE on FY26ii EPS (full year impact),” IIFL Securities noted in its report.
The report added that the likely impact on revenues for NSE would be around 30 per cent, but for BSE, it would be around 10-12 per cent.
Shares of Angel One also rallied more than 7 per cent during the day but cooled down to a gain of 4.5 per cent at Rs 2,716 per share.
Brokerage house Motilal Oswal Financial Services (MOFSL) maintained a ‘Buy’ rating on Angel One.
“Our sensitivity analysis yields no earnings impact for Angel One in FY26 if order volumes decline 10 per cent versus our assumption of 16 per cent growth and the company is able to increase its realisation from Rs 19.7 to Rs 25,” said the report by MOFSL.
Leading discount broker Zerodha also may consider revising its charges once the norms kick in.
“As things stand, assuming that those trading weekly don’t move on to trading monthly, the impact will be ~60% of overall F&O trades and around 30 per cent of our overall orders. I guess things will become much clearer from November 20th. We will then decide on our change in pricing structure, based on the impact on the business,” wrote Nithin Kamath, founder, Zerodha on his social media accounts.
However, shares of other brokerage firms like 5Paisa, IIFL Securities, ICICI Securities, MOFSL, and Aditya Birla Capital declined in the range of 2 per cent to 4 per cent.
Following the Sebi announcement, Jefferies pointed out that the changes may induce trading behaviour changes for both individual and institutional participants, but the impact will be felt more on retail-focused discount brokers.
“Traditional brokers should see relatively lower impact, as the lower margin hikes aid their HNI client base (which tends to have a higher mix of option sellers). Clearing members like Nuvama Asset Services, which cater to institutional players (HFTs / FPIs), will have marginal impact, if any. Other market participants like AMCs, wealth managers, and depositories remain unaffected,” said Jefferies.
First Published: Oct 03 2024 | 5:46 PM IST
