The Multi Commodity Exchange of India (MCX) has a monopoly in commodity exchange trading. However, the exchange has been facing headwinds for the past few years due to the impact of the Covid-19 lockdown, crude. gold prices and new margin rules of market regulator SEBI.
However, HDFC Securities believes that the worst in terms of volume growth is over and the situation may start improving in the near future. “We believe volumes will improve with increase in algo trading, pick-up in crude volumes and implementation of cross margin benefits. The company has recently launched some new products. One of the important measures was to allow DIIs to participate in the commodity markets.”
In addition, the approval of index derivatives is also expected to aid in the development of institutional partnerships which in turn can bring in large volumes on the exchange.
We believe investors can buy MCX on LTP ₹1,672 add more ₹1,504 for the fair value of the base case ₹Fair price for 1,825 and Bull case ₹1,953 in the next two quarters,” the brokerage said in a note.
HDFC Securities expects the downward trend in volumes to end and start a recovery from here on account of higher volatility in gold and crude oil prices.
“Given the way exchange and depository shares have been re-rated recently (as platform companies) and unofficial rates hike for NSE stocks, we feel that MCX will soon get its free cash flow , likely to re-rate with balance sheet-light business. 90% dividend payout,” it added.
Indian top investors and stock market traders, as per June shareholding pattern Rakesh Jhunjhunwala It holds 4.9 per cent stake in the Multi Commodity Exchange of India (MCX).
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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