Bernstein has initiated coverage on India's two major exchanges with a clear preference for Multi Commodity Exchange of India Ltd. (MCX) over BSE Ltd., arguing that trading volumes and earnings growth are likely to diverge between the two.
The brokerage has initiated MCX with an Outperform rating and a target price of Rs 3,830, implying about 14% upside from its September 8 closing price of Rs 3,341.90. It has assigned an Underperform rating to BSE with a target of Rs 2,820, implying roughly 16% downside from its closing price of Rs 3,394.
Bernstein's central argument is that the retail participation boom that drove earnings and valuations across exchanges is now entering different phases across segments.
Equity derivatives, which powered much of the growth in recent years, are showing signs of moderation, while commodity derivatives could be entering a stronger growth phase.
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For BSE, Bernstein expects market-share gains to peak in FY27, followed by a normalisation in growth. It expects market volumes to be affected by lower volatility, RBI norms, the impact of the Closing Auction Session and a high base. The brokerage estimates BSE's FY28-29 growth could normalise to the mid-teens as volume growth moderates and market-share gains fade.
Bernstein is more constructive on MCX, pointing to what it describes as an earlier stage of growth in commodities. It expects continued momentum in contracts traded, with commodity derivatives accounting for about 25% of equity derivatives active traders and around 10% of option volumes. The brokerage also sees potential upside from higher commodity prices, particularly gold, and estimates MCX could be around 10% ahead of consensus on Q2 FY27 volumes and FY27 earnings.
On regulation, Bernstein noted that the regulator has remained vocal on equity derivatives but has eased some commodity-market regulations. It also views the FPI consultation paper as positive for MCX.
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