Global investment bank Jefferies has reiterated its 'Buy' rating on Multi Commodity Exchange of India (MCX), highlighting the company's strong position as a hedge against ongoing crude oil volatility. This comes despite a recent 12% decline in MCX shares, which the firm notes aligns with the broader correction in gold prices.
Jefferies analysts view the recent dip as a prime buying opportunity, setting a price target of Rs 4,000 for MCX, based on 42 times its estimated earnings per share (EPS) for September 2028.
Energy Contracts Drive MCX Revenue
A key factor in Jefferies' optimistic outlook is the composition of MCX's transaction revenue. Contrary to market perception often linking MCX primarily to gold, 60% of its transaction revenue is generated by energy contracts, with bullion accounting for just 40%. This structural setup allows MCX to benefit from increased volatility in the energy markets.
The firm noted that average daily turnover (ADTO) from energy options significantly outperformed expectations in September and October 2026. Brent crude prices and volatility surged following the escalation of the Middle East conflict, leading to a 44% month-on-month rise in MCX's energy options ADTO in September. This trend continued into October, with month-to-date options ADTO reaching Rs 9,200 crore, 48% above August figures. Sustained performance could boost estimated FY27 profit after tax (PAT) by 4-5%.
Structural Tailwinds and Future Growth
Jefferies pointed out that MCX's options revenue, which constitutes 75% of its total revenue, is closely tied to the volatility index (VIX). Indian exchanges, including MCX, offer a natural volatility hedge, with transaction revenue positively correlated with VIX movements. Energy contracts also boast a higher premium-to-notional-turnover ratio, translating into lower regulatory charges.
The investment bank also identified several structural tailwinds for MCX:
- Only one-fifth of National Stock Exchange (NSE) option traders currently trade MCX options, indicating significant room for penetration.
- Opportunities for new product launches.
- Extension of Foreign Portfolio Investor (FPI) participation to non-cash contracts.
- Optionality from potential colocation services and a coal exchange, which could add 15-20% to earnings over the medium term.
Jefferies forecasts MCX's revenue to grow at a 25% Compound Annual Growth Rate (CAGR) through FY29, driven by these factors and the increasing penetration of India's commodity market, which currently lags equities.