MCX Shares At 23-Month High Driven By Surge In Crude Contract, Says Morgan Stanley

The company will implement a new derivatives platform from Oct. 3, with the Clearing Corp. conducting a mock session on Oct. 2.

<div class="paragraphs"><p>(Source: Freepik)</p></div>
(Source: Freepik)

Shares of Multi Commodity Exchange of India Ltd. rose to a 23-month high due to a rise in average daily trading volumes of crude contracts in the September quarter, according to Morgan Stanley.

The brokerage has maintained an "underweight" on the stock.

Separately, the company announced its new derivatives platform would be implemented from Oct. 3. Clearing Corporation is scheduled to conduct a mock session on Oct. 2, according to an MCX circular.

Shares of the company rose 8.63% to an intraday high of Rs 2,104.15 apiece, the most since Oct. 14, 2021, before paring gains to trade 5.87% higher at Rs 2,050.65 apiece as of 11:49 a.m. This compares to a 0.38% decline in the NSE Nifty 50.

It has risen 19.21% in the last six trading sessions and 28.4% on a year-to-date basis. On a quarter-to-date basis, the stock has gained 39%.

Total traded volume so far in the day stood at 14 times its 30-day average. The relative strength index was at 80, implying that the stock maybe overbought.

Out of the nine analysts tracking the company, four maintain a 'buy' rating, two recommend a 'hold,' and three suggest 'a'sell,' according to Bloomberg data. The average 12-month consensus price target implies a downside of 16.1%.

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Morgan Stanley On MCX

  • Maintains 'underweight' with a target price of Rs 1,270 apiece.

  • The launch of its commodity derivatives platform, in partnership with Tata Consultancy Services Ltd., is in line with the brokerage's expected implementation timeline around the October to December quarter of fiscal 2024.

  • Stronger revenue, sustainability, and predictability are the key operatives for an upside risk to the brokerage's target forecast, according to Morgan Stanley's note.

  • Brokerage expects amortisation of technology costs starting in the March quarter of FY24; however, it still awaits clarity on early amortisation.

  • In its earlier commentary, the management said that it will continue paying 63 Moons Technologies Ltd. until the end of its contract in December 2023.

  • The average daily trading volumes of the stock options have sharply risen on MCX for quarter-to-date till Sept. 23, 2023, which has driven the price rally in MCX's shares. However, Morgan Stanley notes a high concentration of about 77% of crude contracts during this period, and thus it states that "it is difficult to predict the sustainability" of the stock movement.