Shares of Multi Commodity Exchange of India (MCX) hit a new high of Rs 5,966.55 as they rallied nearly 6 per cent on the BSE in Wednesday’s intraday trade. The stock of the exchange and data platform company was trading higher for the fourth straight day, gaining 13 per cent during the period. MCX share price has more-than-doubled, soaring 105 per cent from its June month low of Rs 2,917. In 16 months, it has skyrocketed 340 per cent from a level of Rs 1,356 on the BSE.
MCX is India’s leading commodity derivatives exchange with a market share of about 97.84 per cent in terms of the value of commodity futures contracts traded in the financial year 2024-25 (April 2024 – June 2024). It offers trading in a diverse range of commodities, spanning multiple segments including bullion, energy, metals and agri commodities, as well as sectoral commodity indices. The exchange has forged strategic alliances with various international exchanges, as well as Indian and international trade associations.
MCX, in its FY24 annual report, had said that with the potential boost in commodity demand following the economic upswing, there could be new opportunities for the company to innovate and introduce new derivative products that fulfill the requirements of stakeholders in both agricultural and non-agricultural commodities. Therefore, the outlook for the company is positive, primarily due to expanding demand from the improvement in economic activities and the increasing need for commodity price risk management.
“With spread of education and awareness about commodity derivatives, as well as ease of access to the market platform brought mainly by technology-led innovations, MCX is likely to see increasing participation on its platform in the years ahead. Further, participation by financial institutions is also likely to gain momentum as clients increasingly look forward to gaining exposure to commodity derivatives using the services of institutions like Mutual Funds, Portfolio Managers and Alternate Investment Funds,” the company said.
Meanwhile, the management believes the recent changes in regulatory guidelines and commodity derivatives are likely to support MCXs endeavour at achieving expansion and enhanced participation.
“The Securities and Exchange Board of India (Sebi) has revised the minimum duration of staggered delivery period of commodity derivative contracts to three working days from five working days. The company is hopeful to bring this change in near future for all its participants,” the management had said in the Q1FY25 earnings conference call.
Motilal Oswal Financial Services (MOFSL) has reiterated a ‘Buy’ rating on MCX with a target price of Rs 6,500 (premised on 42x Sept’26E EPS).
MCX plans to grow volumes by launching new products, such as serial contracts, index options, 10g monthly gold futures, cotton seed wash oil, crude sunflower oil contracts and many more in the pipeline. After future volumes on these products exceed the volume threshold of Rs 1,000 crore, MCX will launch options contracts.
“For MCX, retail participation has increased to ~0.9 million participants. Retail participation can strengthen further with new product launches, a change in the transaction rate structure (under true-to-label charges regulation) to make it favorable to traders, strong technology-based offerings from discount brokers, and lower ticket-size contracts from MCX,” the brokerage firm said.
From October 1, 2024, MCX will start paying the annual maintenance contract (AMC) to Tata Consultancy Services (TCS), which will be fixed in nature, causing no volatility like the previous quarters. This will lead to a marked improvement in profitability. MCX has not charged any penalty to TCS so far. With the completion of this transition, the management will now focus on scaling up the business, the brokerage firm said.
First Published: Sep 18 2024 | 1:32 PM IST
