Catering to over 90% of the country’s commodity derivative trades, MCX facilitates price discovery and provides critical price risk management tools for commodity traders. Established in 2003, the exchange operates under SEBI’s regulatory framework.
Let’s delve into the MCX business model, its recently launched products, and the potential impact on its operations.
MCX business
MCX is India’s first commodity exchange to introduce options and futures contracts on bullion, base metals, and energy indices. According to its website, as of 30 September , the exchange boasts 544 registered members, 35,096 authorized persons, and a reach spanning 666 towns and cities across India, serving nearly 2.89 crore clients. It has also facilitated the delivery of 5,579 tonnes of bullion and 4.31 lakh tonnes of metals.
In terms of trading volumes, MCX recorded an average daily turnover of ₹26,463 crore in futures and a notional turnover of ₹1,70,040 crore in options during April to September.
Globally, MCX ranks as the third-largest exchange for commodity options and the seventh-largest for commodity derivatives, based on the number of contracts traded in 2023.
Further strengthening its ecosystem, MCXCCL (Multi Commodity Exchange Clearing Corp. Ltd), a wholly-owned subsidiary of MCX, is the first clearing corporation dedicated to the commodity derivatives market in India. This subsidiary plays a crucial role in ensuring seamless clearing and settlement of trades.
Turnover breakdown
In 2024, MCX commanded a 95.9% share of the commodity futures market. Within this, it held a dominant position in key segments: 100% in precious metals, 99.6% in energy, and 99.8% in base metals. However, in the agri-commodities segment, MCX accounted for only 2.6% of the market, with NCDEX (National Commodity and Derivatives Exchange Ltd) dominating the remainder.
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Precious metals contributed the largest share of turnover at 62.4%, followed by energy at 27.7%, base metals at 9.6%, and farm commodities and index futures at just 0.1% and 0.2%, respectively, for FY24. Trading activity comprised 52.4% algorithmic trading and 47.6% client trading during the year.
Key financials
For Q2FY25, MCX reported operational revenues of ₹285.58 crore, a 72% increase compared to Q2FY24. Other income stood at ₹25.24 crore, with a net profit of ₹153.62 crore, a significant recovery from the net loss reported in Q2 FY24.
As of September, shareholding patterns reflected a shift:
Foreign Institutional Investors (FIIs): 22.1%, down from 25.3% in September 2023.
Domestic Institutional Investors (DIIs): 57.4%, up from 56.4%.
Public: 20.3%, up from 18.1%.
Others: Remained constant at 0.2%.
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MCX maintains a healthy dividend payout of 58% and is nearly debt-free. With new products and an upgraded trading platform, the company is expected to see steady revenue growth. However, it faces challenges such as a low return on equity (9.1% over the past three years) and a high valuation, with the stock trading at over 20x its book value.
Future growth drivers
According to a recent report by Motilal Oswal Financial Services on capital markets, MCX’s new product launches are expected to be a key growth driver in the coming years.
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In the Q2FY25 earnings call, Manoj Jain, chief operating officer, MCX, announced modifications to the existing Gold 1kg options bimonthly expiry contracts. Effective 11 November, gold options contracts will have monthly expiry contracts.
In the same earnings call, chief business officer Rishi Nathany elaborated on the unique nature of commodity exchanges, distinguishing them from equities and currencies exchanges. Unlike other exchanges, MCX attracts participation not only from investors and traders but also from foreign portfolio investors and physical market participants. Many stakeholders in the commodities business use MCX to hedge their positions.
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Nathany further highlighted the development of new products, noting that MCX has several offerings in various stages of approval. The exchange is committed to providing a diverse product portfolio that aligns with market needs, strengthening its growth pipeline.
What analysts say
In December, Motilal Oswal Financial Services Ltd downgraded MCX’s stock rating to “Neutral” in its Capital Markets report. The firm projected a 39% compound annual growth rate (CAGR) in revenue and 130% CAGR in profit after tax over FY24-27, driven primarily by a 56% CAGR in option volumes. It set a target share price of ₹7,600, based on 42x the company’s September 2026 EPS estimates, indicating a potential return of 20% from current levels.
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The report highlighted that foreign portfolio investor participation is expected to rise with the introduction of Direct Market Access, although retail participation remains relatively low compared to NSE. Volume growth is anticipated to be fuelled by new products, serial contracts, and mini contracts.
For more such analysis, read Profit Pulse.
In November, HDFC Securities Ltd issued a “Buy” recommendation with a target price of ₹7,000, based on 40x the December 2026 EPS estimates. The recommendation was supported by MCX’s plans to launch weekly options for crude and Index options. HDFC also pointed out that the company has intensified its focus on new products following its recent technology transitions over the past two years.
Note: This article relies primarily on data from www.screener.in and the company’s official presentations. In instances where this data was unavailable, we have referred to alternate but widely recognized and reliable sources.
The objective of this article is to share insightful charts, data points, and thought-provoking opinions. It is NOT a recommendation to buy or sell any stocks. If you are considering an investment, please consult a professional financial advisor. This article is intended solely for educational purposes.
About the author: Mohit Bhambhani is a seasoned financial professional with over 13 years of experience in financial research and corporate advisory. With extensive expertise in the Indian stock markets, his analytical approach provides in-depth insights and value to readers.
Disclosure: The writer and his dependents hold shares of MCX discussed in this article.
