Momentum Pick: MCX jumps 11% in 5 sessions, 70% from 52-week lows. Is there more upside left?

An analysis of the price action suggests that MCX stock has gained 70% from its 52-week lows of Rs 1,285.05, which it hit in May this year. Moreover, despite the ups and downs in the markets, the stock has given returns of more than 60% over the past 12 months, outperforming Nifty50, which has returned 16% during this time. Meanwhile, the year-to-date returns stand at 44%.

Riding on the much-anticipated launch of its brand new web-based Commodity Derivatives Platform (CDP) on October 16, shares of Multi Commodity Exchange of India (MCX) rallied over 11% to hit an all-time high of Rs 2,179.45 on the NSE, remaining unbeaten for five consecutive sessions.

An analysis of the price action suggests that the stock has gained 70% from its 52-week lows of Rs 1,285.05, which it hit in May this year. Moreover, despite the ups and downs in the markets, the stock has given returns of more than 60% over the past 12 months, outperforming Nifty50, which has returned 16% during this time. Meanwhile, the year-to-date returns stand at 44%.

Notwithstanding, a correction amid largely subdued Thursday trade, the stock has a potential upside of up to 16%, going forward. The stock is trading above all its Simple Moving Averages (SMAs), including 5-day and 200-day SMAs, according to Trendlyne data. Its 7 out of 9 oscillators are currently in the bullish zone.

Momentum indicators RSI and MFI are in the medium range of 66 and 64. The stock has displayed steady movement and traded with a 1-year beta of 0.7, which makes it less vulnerable to market volatility.

Jatin Gedia, Technical Research Analyst-Capital Market Strategy at Sharekhan recommends a buy on dips, placing a price target of Rs 2,335, which suggests an 11% uptick from Thursday’s closing price.”MCX has been in a medium-term uptrend and the momentum will likely continue. On the upside, we expect the stock to continue with the momentum till Rs 2,335 which is the 161.82% Fibonacci extension level of the previous wave. The daily momentum indicator has a positive crossover which is a buy signal and in case of a dip, it should be used as a buying opportunity,” Gedia said.

The Sharekhan analyst sees multiple support points in the range of Rs 1,950–1,900 in the form of the 20-day moving average, which he said will likely act as a cushion and restrict further downside.

Fynocrat Technologies Founder & Director Gaurav Goel echoes a similar sentiment on the stock’s strong technicals as he sees bullish momentum remaining intact over a short-to-medium-term period. “The stock exhibits considerable strength on daily and weekly evaluations, encompassing moving averages, momentum oscillators and trend oscillators. As a result, there is a possibility that the stock may demonstrate strength in the short term,” he said.

Nilesh Jain, Assistant Vice President (AVP), Equity Research Technical and Derivatives, Centrum Broking remains most bullish in terms of targets, opining that the current strong uptrend and a fresh breakout from a rounding bottom pattern leaves an upside of Rs 2,300 followed by Rs 2,450. He sees support at Rs 2,020.

Fundamental View
MCX reported a 52% year-on-year (YoY) decline in its consolidated June quarter net profit at Rs 19.66 crore versus Rs 41.46 crore reported by the company in the year-ago period. The revenue from operations stood at Rs 145.77 crore which was up from Rs 118.05 crore reported by the company in the corresponding quarter of the previous financial year. Most of its expenses were due to software support charges and license fees, which jumped over four-fold to Rs 88.78 crore in the April-June quarter of FY24 vs 19.23 crore in the same period of FY23.

Sudip Bandyopadhyay, Group Chairman, Inditrade Capital-JRG told ET NOW that market infrastructure companies should now be looked at as these are fundamental to running the markets. “One can definitely look at MCX, the transition to the new platform which is happening next week should take them to a different level. Also, the launch of new products and services should help MCX. It has suffered in the past and now I think its time has come and it can definitely be looked at,” he said.

However, Fynocrat Technologies Founder & Director Gaurav Goel is not impressed by the stock’s fundamentals. “From an investment perspective, our outlook on MCX is not particularly bullish due to its less-than-ideal fundamentals and relatively high valuations when compared to long-term averages. Therefore, if you are a long-term investor seeking substantial returns in the future, this might not be the most opportune moment to consider purchasing this stock,” he suggested.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)