The Multi Commodity Exchange of India Ltd (MCX) has witnessed a meteoric rise, mirroring the unexpected bullion boom of 2025. Its stock achieved a historic peak of ₹11,219 on Monday, capping off a year where it gained nearly 80%. This rally, fueled by soaring gold and silver prices, has prompted a wave of broker upgrades, even as a stock split looms and questions arise about the sustainability of such heady valuations.
Brokerages Play Catch-Up Amid Bullion Frenzy
The explosive performance of MCX has left analysts scrambling to revise their models. Motilal Oswal Financial Services took the lead, boosting its FY27 earnings per share (EPS) estimate by close to 27% following the strong September quarter (Q2FY26) results. The brokerage highlighted robust volume growth in gold and silver contracts as the key driver.
This week, Morgan Stanley joined the fray with an even more aggressive move, hiking its price target for MCX by a striking 66% to ₹11,135. Notably, this upgrade was largely due to a re-rating of the price-to-earnings multiple, with the actual FY27 EPS estimate being lifted by 20%. The underlying message is clear: the market is willing to pay a higher premium for MCX's growth story, centred on precious metals.
Revenue Mix Shifts as Bullion Takes Centre Stage
The quarterly numbers tell a compelling story of a strategic pivot. In Q2FY26, MCX's total transaction charges stood at ₹337 crore, comprising ₹114 crore from futures and ₹223 crore from options. While this was largely flat sequentially, a significant shift occurred beneath the surface.
The contribution from energy trading to transaction charges fell from 64% in Q1 to 57% in Q2. Conversely, bullion's share rose impressively from 36% to 43%. This change was driven by a combination of an absolute decline in energy turnover and a substantial rise in the turnover from gold and silver contracts. For MCX, bullion is no longer just a segment; it is becoming the main engine of transaction revenue.
New Products and the Q3 Outlook
The momentum appears to be strengthening. Bullion futures trading hit a record high in October, setting the stage for a potentially stronger Q3FY26 (October-December). Rising prices, especially when coupled with sharp intraday volatility, are a potent magnet for traders.
MCX is not resting on its laurels. To sustain this interest, it launched monthly options contracts on the MCX BULLDEX index from October. This index tracks gold and silver in a 60:40 ratio. The exchange management believes these contracts will attract a broader set of participants, including retail traders, hedgers, and institutional investors. Plans for weekly contracts, similar to those on equity exchanges, are also under evaluation.
The Critical Question: Can High Prices Guarantee High Revenue?
With gold and silver posting staggering gains of 65% and 148% respectively in 2025, a crucial question emerges: does continued price momentum automatically translate to growing revenues for MCX in the coming years?
The answer is not straightforward. Transaction charges depend on both price and volume. A pertinent analogy exists in equities. Despite the Nifty 500 index gaining 6.7% over a year, the NSE's average daily turnover fell from ₹104,000 crore to ₹94,400 crore in December. Higher prices, if accompanied by lower volumes, can lead to reduced turnover in value terms.
The same risk applies to commodities. The central uncertainty is whether the surge in trading volumes for bullion contracts can be sustained if prices continue their upward climb. If volumes stagnate or decline, MCX's transaction revenue could suffer despite elevated bullion prices.
This earnings risk is why investors must carefully evaluate the runway left for MCX. The stock now trades at a lofty 50x P/E ratio based on Bloomberg consensus FY27 estimates, which is at an almost 25% premium to the valuation of BSE Ltd. The record-breaking rally has been spectacular, but its endurance hinges on the bullion market's ability to keep delivering both high prices and high volumes.
