Gold price selloff: Jefferies calls battered MCX shares hedge against crude volatility; here's why

Jefferies on Monday called MCX a hedge against ongoing crude volatility. Noting that MCX shares are down 12 per cent over the past month, in line with the correction in gold prices, Jefferies said the fall provides a good opportunity to 'Buy' the stock. Bullion accounts for only 40 per cent of MCX's transaction revenue, while energy contributes 60 per cent, with September-October 2026 average daily turnover (ADTO) ahead of estimates.

If sustained through the December quarter, this could lift estimated FY27 profit after tax (PAT) by 4-5 per cent, Jefferies said, reiterating its 'Buy' rating with a price target of Rs 4,000, based on 42 times September 2028 estimated earnings per share (EPS).

"MCX offers a hedge against crude volatility, unlike global peers. It trades at 36 times FY28 estimated EPS, with a 26 per cent three-year EPS CAGR. The share price is linked to gold prices, while PAT is more closely linked to crude. Historically, MCX's share price has been strongly correlated with gold prices. This relationship has continued, with MCX's share price falling 12 per cent over the last month, consistent with the correction in gold prices," Jefferies said.

Jefferies said the correction ignored the fact that 60 per cent of MCX's transaction revenue is generated by energy contracts, while bullion contracts account for only 40 per cent. It added that MCX's options revenue, which accounts for 75 per cent of total revenue, is more closely linked to the volatility index (VIX).

"Brent crude prices and volatility have increased over September-October following the escalation of the Middle East conflict. This resulted in MCX's energy options ADTO rising 44 per cent month-on-month in September 2026. The trend has continued into October, with month-to-date options ADTO of Rs 9,200 crore, 48 per cent above August. Should we assume options ADTO of Rs 8,500 crore in 3QFY27, that would lead to 4-5 per cent higher FY27 estimated revenue/EPS," Jefferies said.

The global investment bank said energy contracts also have a higher premium-to-notional-turnover ratio, translating into lower regulatory charges.

Jefferies said Indian exchanges provide a volatility hedge, in addition to structural tailwinds from growing penetration, as transaction revenue is positively correlated with the VIX, given that options revenue is premium-based.

"MCX has multiple structural tailwinds, noting: (1) only one-fifth of NSE option traders trade MCX options, (2) new product opportunities, and (3) FPI participation being extended to non-cash contracts. Further, optionality exists in colocation and coal exchange, which could add 15-20 per cent to earnings over the medium term. Where do we go from here? India's commodity market lags equities, but penetration should rise, with MCX, the leading non-agri exchange, well-placed to benefit," Jefferies said.

Jefferies forecast MCX's revenue to grow at a 25 per cent CAGR through FY29 despite the elevated base, citing scope for new products and retail participation that remains at one-fifth of NSE's.