Sensex ka baap quietly zooms 132% in 3 months, when index gains 10%

While you were busy calculating whether the Sensex will go up, down or remain stuck in a time loop, smart investors doubled their money by betting on the stock exchange itself.

In the last three months, while Sensex has risen 9.6 per cent, the stock of the index's parent BSE has shot up by a whopping 132 per cent! BSE shares can be traded only on its unlisted competitor NSE platform, where the stock has been making new 52-week highs in each of the last six sessions. A pickup in trading volumes shows huge investor interest in this dark horse.

As the number of demat accounts swells in India with every passing day due to a massive surge in retail participation, investors have started betting heavily on stocks related to the market infrastructure.

The stock of Angel Broking is up 300 per cent in three months, which shows that retail investors are not only opening demat accounts with the stock broker, but also buying the broker's stock! Similarly, the shares of Motilal Oswal Financial Services and ICICI Securities have gone up by around 88 per cent each in three months.

CDSL, which provides depository services in the stock market, is up 115 per cent and CAMS, which is a mutual fund transfer agency, has gained around 70 per cent during the period.

"The BSE stock has already run up significantly. Unfortunately, NSE is not listed, and so people do not have any other option, but to buy BSE. Although NSE corners a major volume, BSE itself has stolen the story. We believe the platform holds humungous value. We cannot rule out further upside in the stock,” says Vivek Mahajan, Senior Vice-President, Aditya Birla Money. He believes the stock can fly higher towards Rs 1,800-2,000 range in the next one year.

Refinitiv data shows only three analysts cover the stock, but their price targets have already been achieved.

“We continue to see BSE as a tactical play of a combination of the core business and the potential value from revenue scale-up in new segments (Star MF, Commodities and INX). Increased margins would further add to the bottom line on account of high operating leverage," Motilal Oswal said in its report. ICICI Securities also had an ‘add’ rating on the stock last month.

BSE's FY21 revenue increased 11.1 per cent YoY and Ebitda margins were up to 15 per cent vis à-vis breakeven in FY20. Its profit after tax shot up by 25.8 per cent to Rs 143.4 crore during the last financial year. With a market-cap of Rs 6,000 crore, BSE has a 20 per cent stake in CDSL worth Rs 3,000 crore.

Last month, the bourse had crossed the milestone of 7 crore registered users. The market capitalisation of BSE-listed companies has already zipped past the $3 trillion mark.

"We are a fintech company in the guise of a stock exchange.....In some ways, exchanges are platform plays and we are the technology providers to that exchange industry today. We are the only exchange in India that owns, maintains, operates most of its technology and that differentiates us from other exchanges," BSE Managing Director and CEO Ashishkumar Chauhan said in an interview to ET Now.

The launch of mega IPOs like that of Zomato, Paytm and LIC are also being seen as triggers for the BSE stock.

India's largest stock exchange, NSE, may get listed next year. Just like how BSE shares are tradable only on NSE, NSE shares would also be tradable only on BSE upon listing.

The next time when a market guru predicts that the Sensex may hit the 200,000 mark in the next 10 years, also spare a thought as to what could be the long-term potential of the stock exchange’s stock.