Global brokerage firm Bernstein has significantly upgraded its outlook on Multi Commodity Exchange of India (MCX), now expecting the exchange to deliver stronger-than-anticipated earnings growth. The firm has raised its FY27 options volume estimates by 11% and futures volumes by 7% above consensus, while maintaining its 'Outperform' rating with a 12-month target price of ₹3,830, implying 15% upside from the stock's September 7 closing price of ₹3,330. According to Moneycontrol, Bernstein is now 10-12% ahead of consensus on MCX's FY27-28 earnings, with the brokerage expecting the exchange's revenue from operations to rise to ₹30,098 crore in FY27 from ₹23,020 crore in FY26, and net profit projected to increase to ₹18,394 crore from ₹13,314 crore over the same period. The enhanced outlook reflects stronger-than-expected momentum in commodity derivatives volumes and further room for retail participation to grow.
Bernstein sees strong momentum in commodity derivatives and believes the participation wave is still at an early stage, with contracts traded on MCX showing exceptional growth momentum. According to The Economic Times, commodity derivatives volumes grew fourfold year-on-year in July 2026 and rose 2% month-on-month in August, with September trends also moving higher. The brokerage attributed this growth momentum to the relatively low penetration of commodity derivatives compared with equity derivatives, both by trader count and volumes. Commodity derivatives account for around 25% of equity derivatives' active traders and about 10% of option volumes, leaving room for further participation. Commodity derivatives have already shown strong momentum, with commodity options contracts rising 4.3 times year-on-year, while futures contracts increased 2.1 times. Retail brokers are also pushing awareness and participation in commodity derivatives as they look to diversify away from equity index options, build their next leg of growth and offer round-the-clock options trading, given the longer trading hours in commodities. MCX futures segment revenues have direct linkages to gold and silver prices, with higher prices translating into higher turnover. Bernstein currently factors in a modest 2% quarterly rise in gold prices but believes there is room for a positive surprise, expecting global central banks to resume gold purchases and policymakers to remain incentivised to keep real yields low.
Bernstein sees significant regulatory catalysts supporting MCX's growth trajectory, with a recent consultation paper proposing wider participation by foreign portfolio investors (FPIs) in commodity-index derivatives and physically settled commodity contracts. The brokerage expects greater FPI participation in bullion and base-metal futures and options to deepen liquidity, though it has not included the potential volume boost in its forecasts yet. The easing of stress-testing requirements for commodity clearing houses could benefit MCX by reducing its settlement-guarantee fund requirements, potentially releasing capital, increasing float income and supporting higher dividend payouts. MCX derives around 86% of its revenue from transaction charges, with roughly two-thirds of those charges coming from options and one-third from futures. Bullion dominates the futures business, while energy contracts, particularly crude oil and natural gas, have historically been important for options. The implementation of the closing auction session (CAS) in equity markets has also provided an interim boost to commodity derivatives participation, as retail brokers have an incentive to direct traders towards commodities as equity derivatives face greater regulatory pressure.
Bernstein's comprehensive framework reveals significant valuation differences between the two exchanges. The brokerage values MCX at around 45 times FY28 earnings compared to BSE at 32 times FY28 earnings. According to The Economic Times, the divergence in growth and earnings revision cycles is driving Bernstein's preference for MCX over BSE, with continued growth momentum and potential earnings upgrades likely to support MCX's valuation. The firm expects MCX to benefit from rising retail participation, new products and the ability to bring equity derivatives traders into commodities. It anticipates exceptional growth momentum in contracts traded, and this can go on, with commodity derivatives accounting for about 25% of equity derivatives active traders and around 10% of option volumes. Bernstein is 10-12% ahead of consensus on MCX's FY27-28 earnings, while it is 2-4% below consensus for BSE, with the brokerage expecting the earnings upgrade cycle for MCX and the normalisation of growth at BSE to increasingly differentiate the two stocks. For BSE, the brokerage expects market share gains to continue through FY27 but peak by the end of the financial year.
BSE faces multiple headwinds that are expected to impact its performance in the upcoming period, according to Bernstein analysts. The firm highlighted that market volume impact due to lower volatility, the Reserve Bank of India's norms in H2 FY27, the closing auction session (CAS) impact, and a higher base value are expected to affect BSE's performance. Bernstein expects equity options volumes to grow only about 5% year-on-year in FY27 compared with 31% growth in the first quarter, as lower volatility, tighter leverage norms for proprietary trading desks and the impact of the closing auction session (CAS) weigh on activity. The temporary CAS-related disruption is expected to ease by October, but Bernstein sees further pressure from tighter leverage norms through the second half of FY27. BSE's average daily option contracts in the second quarter at 124 million, down 20.2% from the Q1FY27 average of 156 million. Wall Street brokerage Jefferies highlighted that the key challenge with CAS has been the uncertainty on expiry day, forcing option writers to stay away from the market, which has reduced the profitability of proprietary traders. Domestic brokerage firm ICICI Securities suggests that BSE's premium ADTV stood at ₹18,700 crore in August, down 26.5% from ₹25,400 crore in July, with premium ADTV for the second quarter at ₹22,000 crore, down 25.7% from ₹29,700 crore in the first quarter.
