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MCX spikes 4% as foreign portfolio investors allowed to trade in commodity derivatives

Sebi has already allowed institutional investors such as Category III alternative investment funds, portfolio management services and mutual funds to participate in Exchange Traded Commodity Derivatives

June 30, 2022 / 10:12 AM IST

Shares of Multi Commodity Exchange (MCX) gained nearly four per cent on Thursday after the market regulator Securities and Exchange Board of India (Sebi) gave approval to foreign portfolio investors (FPIs) to trade in commodity derivatives.

The stock hit a high of Rs 1,324 on BSE, up 3.82 per cent, before paring gains to 1.25 per cent to trade at Rs 1,291.

“FPIs will be allowed to trade in all non-agricultural commodity derivatives and select non-agricultural benchmark indices. To begin with, FPIs will be allowed only in cash-settled contracts,” Sebi said after a board meeting.

The regulator said the participation of FPIs in Exchange Traded Commodity Derivatives (ETCDs) is expected to enhance liquidity and market depth as well as promote efficient price discovery.

Sebi has already allowed institutional investors such as Category III AIFs, portfolio management services (PMS) and mutual funds to participate in ETCDs.

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Analysts are also hopeful of greater participation of investors now. “MCX, being one of the top commodities exchanges in non-agro space, will get direct advantage of the FPI participants,” said Tapan Patel, senior analyst (commodities), HDFC Securities.

MCX is one of the most favoured financial services stocks of analysts on Dalal Street, although it has seen selling along with the entire market. It is now trading down about 40 per cent from 52 week highs.

This, many believe, could be an opportunity to buy the stock at a discount. Average analyst target sees 37 per cent upside in the counter, with some of the highest targets estimating upsides of about 65 per cent.
Shubham Raj
first published: Jun 30, 2022 10:12 am
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