04 Oct , 2021 By : Kanchan Joshi
Multi Commodity Exchange Of India (MCX) has a near monopoly in commodity exchange business. Though, the exchange has been facing headwinds since past few years due to Covid-19 lockdown, crude impact, subdued trend in gold prices and market regulator SEBI’s new margin rules.
However, HDFC Securities believes that worst in terms of volume growth is over and things could start improving in near term. “We believe volumes would recover with increase in algo trading, pick-up in crude volume (reduction in margin) and implementation of cross margin benefits. The company has recently launched a few new products. Permission to DIIs to participate in commodity markets was one of the significant measures," it said.
Further, approval of Index derivatives is also expected to aid the growth of Institutional participation which in turn could bring large volumes on the exchange.
“We believe that investors can buy MCX at LTP of Rs1,672 and add more at Rs1,504 for the base case fair value of Rs1,825 and for the bull case fair value of Rs1,953 over the next two quarters," the brokerage said in a note.
HDFC Securities expects volume decline trend to be over and it will start to recover from here on aided by higher volatility in Gold and Crude oil prices.
“Considering the way the exchange and depository stocks have go rerated recently (as platform companies) and the rise in unofficial rates for NSE stock, we think MCX is likely to get rerated soon given its free cash flow, balance sheet-light business with a 90% dividend payout," it added.
As per June shareholding pattern, Indian ace investor and stock market trader Rakesh Jhunjhunwala holds 4.9% stake in Multi Commodity Exchange Of India (MCX).
0 Comment