Motilal Oswal's research report on MCX
SEBI has allowed FPIs to participate in cash-settled non-agricultural commodity derivative contracts through the exchange-traded commodity derivative (ETCD) market. MCX contracts eligible for participation are crude oil futures and its variants, natural gas futures and its variants, and crude/natural gas options and Energy Index (ENRGDEX) futures. With a 98%/99% correlation of MCX Crude/MCX Natural Gas with NYMEX WTI crude oil/Nymex Henry Hub Gas prices, FPIs will find MCX products as a proxy for global benchmarks in crude oil and natural gas. The participation of FPIs in ETCDs is expected to enhance liquidity and market depth and promote efficient price discovery.
The software migration issue is a near-term barrier for MCX. In the long term, we believe volumes for MCX should increase as FPIs participate in Indian commodity derivatives. Volumes have been scaling up, driven by an uptrend in option volumes and recommencement of mini contracts. We believe the software transition issue will be a key overhang in the near term. We have a Neutral rating on the stock with a 1-year TP of INR1,450, based on 24x FY25E EPS.
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