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Bernstein Favors MCX, Warns on BSE's Slowdown
9 Sep
Summary
- Brokerage favors MCX for commodity derivatives growth over BSE.
- BSE faces moderating equity derivatives volumes post-CAS.
- MCX sees strong commodity participation, growth potential.
International brokerage Bernstein has initiated coverage on stock exchanges BSE and MCX, expressing a more favorable view on the commodity exchange. Bernstein initiated coverage on MCX with an Outperform rating, targeting a 15% upside, driven by strong momentum in commodity derivatives. The brokerage believes participation in this segment is in its early stages and expects continued growth.
In contrast, Bernstein has assigned an Underperform rating to BSE, with a target price suggesting a potential downside. The firm's caution stems from moderating equity derivatives volumes, partly due to the impact of the Closing Auction Session, and expectations of a sharp deceleration in BSE's earnings growth.
Bernstein's analysis indicates that commodity derivatives volumes have shown significant year-on-year growth, with potential for further expansion due to lower penetration compared to equity derivatives. Retail brokers are also actively promoting commodity derivatives to diversify revenue streams.
For BSE, Bernstein projects a normalization of its growth trajectory after a period of strong gains. The brokerage anticipates that market share gains for BSE will peak around Q4FY27, leading to a moderation in earnings growth from substantial CAGRs to around 15% by FY28-FY29.
Bernstein values MCX at approximately 45x FY28 EPS, while BSE is valued at about 32x FY28 EPS. This divergence in growth prospects and earnings revision cycles underpins the brokerage's preference for MCX.
