Jefferies maintained its Buy rating and ₹4,000 target for MCX, arguing that rising energy options activity and market volatility could drive earnings despite the recent pull-back in gold.
Shares of Multi Commodity Exchange of India rose after Jefferies argued that the exchange is being misread as a proxy for gold, when its earnings are more closely tied to volatility in crude oil and energy derivatives. The brokerage kept a Buy rating and set a target price of ₹4,000, implying roughly 32% upside from the levels cited in recent market reports. While MCX has slipped about 12% over the past month alongside the pull-back in gold, Jefferies said that move obscures the exchange’s stronger exposure to energy trading.
According to Jefferies, energy contracts generate about 60% of MCX’s transaction revenue, compared with 40% from bullion. The firm also said options now account for around three-quarters of total revenue, making earnings more sensitive to changes in market volatility than to the direction of any single commodity. That matters because MCX’s share price has often moved in step with gold, even though the business mix is more diversified than that suggests.
The brokerage said rising Brent crude prices and greater volatility through September and October, after tensions escalated in the Middle East, lifted trading in energy options. It pointed to a 44% month-on-month increase in energy options average daily turnover in September and said month-to-date turnover in October remained well above August levels. On Jefferies’ assumptions, that momentum could add several percentage points to MCX’s revenue and earnings for the current financial year.
Jefferies also argued that energy contracts carry a better premium-to-notional turnover ratio than other products, which helps reduce regulatory charges. Beyond that, it said Indian exchanges can act as a broader hedge against volatility because options revenue is premium-based and tends to benefit when market swings increase. The firm said MCX also has room to grow through new products, higher retail participation and potential foreign portfolio investor access to non-cash contracts.
Looking further ahead, Jefferies expects MCX to keep expanding even after a strong run in the share price over the past year. S&P Global Market Intelligence said earlier this year that the exchange had already benefited from a surge in commodity trading volumes, with options revenue expected to rise sharply as futures and options turnover increased. Jefferies, meanwhile, said MCX still reaches only a fraction of the participation seen in NSE equity derivatives, leaving scope for long-term growth if India’s commodity market deepens as expected.
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