MCX, BSE shares fall up to 5%; is the NSE IPO buzz behind the decline?

Shares of Multi Commodity Exchange of India Ltd (MCX) and BSE Ltd came under selling pressure in Tuesday's trade. MCX declined 5.38 per cent to hit a day low of Rs 2,576.90, while BSE slipped 4.53 per cent to Rs 3,630.60.

The decline came after Jefferies released a note on NSE, stating that the exchange is among the world's most profitable, excluding regulatory expenses. The brokerage noted that NSE, which has filed draft papers with the Securities and Exchange Board of India (Sebi) for its proposed Rs 30,000 crore initial public offering (IPO), has a more diversified product mix than BSE and MCX, with over 90 per cent market share across most segments.

Jefferies also said NSE has built a technology product suite comparable with global peers and is expanding its commodities business.

The brokerage added that NSE's higher clearing market share and premium to notional turnover in equity options have supported stronger profitability than BSE. It further said the proposed NSE listing would complete the "trifecta" of listed Indian exchange operators.

"Strong operating cashflows combined with limited capex (3-3.5 per cent of revenues) resulted in NSE distributing 74 per cent and 85 per cent of earnings as dividends in FY25-26, respectively," Jefferies said.

Meanwhile, Ravi Singh, Chief Research Officer at Master Capital Services, said, "The recent decline in BSE and MCX shares seems to be more of a market reaction than a reflection of any weakness in their businesses. With the NSE IPO gaining momentum, investors are shifting their focus towards the country's largest stock exchange, which has triggered some profit booking in other listed exchange stocks after their strong run."

He added, "However, the long-term outlook for both BSE and MCX remains positive. BSE continues to benefit from rising retail participation, healthy IPO activity and growth in the equity market, while MCX is well placed to gain from increasing interest in commodity trading."

Singh further stated, "India's financial markets are expanding steadily, creating growth opportunities for all major exchanges. Therefore, the current correction appears to be sentiment- and valuation-driven, and investors with a long-term perspective can consider such declines as an opportunity to accumulate fundamentally strong businesses."