MCX: Scaling New Heights. Maintain BUY

MCX continues to deliver a compelling growth story, powered by new product launches, a stable technology platform, regulatory tailwinds, and rising commodity participation—further amplified by elevated volatility and discount broker integration. As highlighted in our June 2025 report, bullion has risen as a major contributor to options trading, previously dominated by energy contracts; this shift unfolded over the last three quarters, with bullion contribution at ~57%/30% of options notional/premium ADTV in Q4FY26, a sharp jump from 25%/9% in Q4FY25. Options premium ADTV accelerated further in Q4 from a higher Q3 base, climbing to ~INR 106bn from INR 71bn, propelled by a robust +89% QoQ rebound in energy contracts and ~14% QoQ growth in bullion after it more than tripled in Q3. The Q4 crude volume surge tied directly to spiking volatility, which hit 3.7% in March 2026 (vs 1.3% YoY)—the highest in four years, with a ~90% correlation to the P/N ratio. We don’t anticipate sustained elevated volatility, so we have normalized volume expectations, penciling in Q4FY27E premium ADTV at INR 75bn, ~45% below the March 2026 levels (INR 136bn).

MCX’s options portfolio is now well-diversified, with gold and silver contracts contributing ~30% of options ADTV alongside established crude and natural gas contracts. The options premium base has shifted from INR 35-45bn to INR 70-80bn even in a normalized environment; spikes in global volatility can push premiums to the INR 130-150bn band, though it eventually settles back to the new base. The expiry distribution further supports this reset — crude and energy contracts expire in the first half of the month, while gold and silver expire at the end — helping maintain steady volumes throughout. Options active UCCs rose 62% YoY to 0.89mn in Q3 from 0.55mn, signalling broader participation fuelled by discount brokers. Despite this surge in participation, MCX still trails equity exchanges which have ~4-5mn active investors in equity options. We expect notional/premium volume to register a +56/42% CAGR over FY25-28E. We raise our revenue and EPS estimates by 7-13% to reflect the Q4 uptick but trim the multiple to 43x (from 46x earlier) amid near-term volume uncertainty. We maintain BUY with a TP of INR 2,950, based on 43x FY28E core EPS plus cash (ex-SGF and trading margin).

Options premium growth robust, sustainability difficult: The options notional turnover for the quarter stood at INR 6.2trn, down 7% QoQ, but the P/N increased to ~1.8% (vs ~1.1% QoQ), leading to a sharp rise in options premium (~INR 112bn +50% QoQ). The options volumes surged significantly in Q4FY26E due to sharp increase in bullion volumes in Jan-26, followed by a surge in crude volume due to tensions in the Middle East in Mar-26. However, we expect the volumes to normalize and have assumed a premium ADTV of INR ~79bn for Q1FY27E, down 25% QoQ. The P/N will normalize to ~1.2% and premium will normalize back to the new base of INR 70-80bn. In case the current run rate (>INR 100bn premium ADTV) sustains, there could be further upgrades.

Commodity cost of trading attractive: Despite the Securities Transaction Tax (STT) being twice the rate of Commodities Transaction Tax (CTT), budget 2026 refrained from hiking CTT and instead increased STT by 50-150%. This deliberate policy stance signals regulatory support for the nascent commodities market, rendering it even more attractive for traders. The cost of trading for commodities futures/options is now ~35/38% lower vs equities.

4QFY26E is another record quarter: MCX is expected to report its highest ever revenue of INR 8.92bn (+34.1%/206.3% QoQ/YoY) and PAT of INR 5.5bn (+ 37.2/306.3% QoQ/YoY). The options and futures revenue will be INR 5.74/2.40bn +51.1%/5.8% QoQ. The EBITDA margin at 76.8% will be up 245bps QoQ.

Index and FPI are future growth drivers: The cash-settled index contracts such as Metldex and Bulldex is expected to generate growth thrust and attract higher participation from FPIs and institutions and are future growth drivers. SEBI indication to allow FPI and domestic institutional participation in non-cash settled commodities is a positive step, especially given MCX’s current FPI volume share of only ~2% versus ~16% for equity exchanges. Additionally, the co-location facilities in commodities could pave the way for HFT activity, which has been a significant volume driver in equity markets. These developments amplify our earlier thesis of sustained options growth, supported by both product innovation and structural market reforms, and strengthen our conviction on MCX’s long-term earnings trajectory.

Valuation and view: MCX is up ~12%/124% in the last 3M/1Y and is trading at a P/E of 40x FY27E, which is in line with the BSE multiple. Historically, MCX has traded at a ~15% premium to equity exchanges based on the optionality and lower regulatory risks. The rising volumes, stable tech platform, regulatory tailwinds, and the option value linked to the launch of new products have resulted in outperformance, which we believe will continue. The stock has traded at a 3 year average one-year forward P/E of ~43.7x and is currently trading at a P/E of 40/34x FY27/28E EPS. We have assigned a core P/E multiple of 43x and the implied P/E multiple on FY28 EPS is ~41x.