MCX stock check: Up 198% in last one year, should you buy now? Technical and fundamental experts answer

Multi Commodity Exchange of India (MCX) has witnessed a remarkable multibagger rally, with the stock climbing 198 percent in the last one year. So far in 2024, the stock has risen by 68 percent, giving positive returns in seven out of the nine months.

In Septmeber, the stock added almost 4 percent, extending its gains for the fourth consecutive month. In August, it rose by almost 21 percent, following a 9.3 percent gain in July and an 8 percent increase in June, despite a 11.5 percent dip in May. 

From February to April, the stock remained volatile, with a 22.7 percent gain in April, an 11 percent fall in March, a 10.2 percent rise in February, and 6.7 percent jump in January.

The stock hit a record high of ₹5,420 in intra-day deals today, soaring over 218 percent from its 52-week low of ₹1,701.30, in September last year.

With such a substantial rally behind it, the key question for investors is whether this upward momentum will continue. Here's what the experts say about the stock's technical and fundamental outlook.

Earnings

MCX, India's largest commodity exchange, reported a substantial increase in its net profit for the June quarter, which soared more than fourfold to ₹111 crore, up from ₹20 crore in the same period last year. This impressive growth was driven by a significant rise in trading volumes, reflecting increased market activity.

The exchange's total income also saw a notable boost, rising by 54 percent to ₹228 crore, compared to ₹148 crore in the previous year. EBITDA for the quarter experienced a dramatic increase, reaching ₹151 crore, up from ₹31 crore in the corresponding period last year.

In addition to its financial performance, the Board of MCX has approved a further investment of ₹10 crore in its associate company, India International Bullion Holding IFSC. This investment will be made through the subscription to a rights issue of 20 crore equity shares, signalling MCX’s commitment to expanding its strategic partnerships and investments.

Technical View

Pravesh Gour, Senior Technical Analyst at Swastika Investmart, notes that MCX recently broke out of a flag formation on its weekly chart, indicating that bulls are driving the stock to higher highs and lows. The stock is trading above all its Simple Moving Averages (SMA), and momentum indicators are favourable. However, Gour warns that the stock could become risky at current levels, with ₹5,500 as a psychological resistance. He recommends a buy-on-dip strategy, with a focus on the ₹4,800- ₹5,000 zone as a good entry point and a target of over ₹6,000 while setting a stop-loss at ₹4,600.

Rajesh Palviya, SVP - Technical and Derivatives Research at Axis Securities, observes that MCX is in an upward trend, marked by consistent higher tops and bottoms. It is trading above its 20, 50, 100, and 200-day SMAs, all trending upwards, which confirms a bullish outlook. A weekly Bollinger Bands buy signal further supports increasing momentum, with the stock reaching an all-time high of ₹5,364. Palviya suggests maintaining long positions with an upside target of ₹5,515- ₹5,750. The key support zones are at ₹5,120- ₹5,000- ₹4760, and minor corrections towards these levels should be viewed by investors as buying opportunities. Strength indicators across daily, weekly, and monthly charts remain positive.

AR Ramachandran, Co-founder & Trainer at Tips2trades, acknowledges that while MCX is bullish, it is also overbought on daily charts, with the next resistance at ₹5,758. He advises investors to book profits at current levels, noting that a daily close below support at ₹5,134 could result in a decline to ₹4,510 in the near term.

Fundamental View

HDFC Securities: The brokerage has a buy call on the stock with a target price of ₹6,000, implying an upside potential of over 12 percent.

HDFC Securities said that their confidence in MCX’s strategic direction has increased, given the company’s initiatives, such as launching new products like monthly series and index options, enhancing its technology stack, and focusing on boosting institutional participation and hedging activity. The appointment of the new MD & CEO, Mrs Praveena Rai, is expected to further support these strategies. Despite ongoing regulatory challenges, including restrictions on index options volume and changes to clearing funds and fee structures, MCX is poised to endure and grow. The company's commodity futures and options volumes are experiencing strong growth, and new products are anticipated to address gaps and bolster the growth narrative. HDFC Securities projects a compound annual growth rate (CAGR) of +61/43% in notional/premium volume over FY24-27E.

ICICI Securities: The brokerage has a hold call on the stock with a target price of ₹5,348.

ICICI Securities says that MCX has experienced strong volumes in both options and futures, with improved premium conversion rates in August 2024 following a weak July. The strength across all three revenue drivers—futures, options, and premium conversion rates—has led to earnings upgrades of 14.8 percent and 22.7 percent for FY25E and FY26E, respectively. 

However, ICICI Securities maintains a hold rating due to limited visibility on future volume trends, which restricts further multiple upgrades. Current valuations adequately reflect potential volume growth. To achieve the projected growth, options would need to double compared to futures from August 2024 to FY26, with a premium conversion rate of 1.4 percent for FY26E and a valuation of 35x FY26E PE. This implies a required growth of approximately 38 percent to 76 percent in futures and options between Q1FY25 and FY26E, even under a 40x multiple, the growth needed is around 30 percent to 60 percent.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.