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    MCX daily traded value bounces; Easing margin norms helps

    MCX daily traded value bounces; Easing margin norms helps

    MCX daily traded value bounces; Easing margin norms helps
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    By Ankit Gohel   IST (Published)

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    The Average Daily Traded Value (ADTV) on the Multi Commodity Exchange of India (MCX) bounced back to Rs 36,800 crore in the first week of February as compared to Rs 29,600 crore in December 2020 and Rs 31,800 crore in January 2021.

    These days investors are not letting off any opportunities as evident in the volume growth witnessed across the asset class. The commodity derivatives too saw increased participation.
    Further, the regulator responding with favourable changes in margin norms provided much-needed boost in sentiment.
    The Average Daily Traded Value (ADTV) on the Multi Commodity Exchange of India (MCX) bounced back to Rs 36,800 crore in the first week of February as compared to Rs 29,600 crore in December 2020 and Rs 31,800 crore in January 2021.
    MCX reported strong MoM growth in ADTV mainly led by robust volume growth in crude oil which was up 118 percent MoM. Silver volume growth was 14 percent and that of natural gas was up 14 percent, MoM.
    Meanwhile, gold's contribution to overall ADTV growth was marginal as the rise in its volumes was offset by drop in prices. Base metals’ contribution too remained weak, according to a report by ICICI Securities.
    The improvement in ADTV comes after the reduction in the initial margin or short option minimum margin requirement for crude oil to 10 percent on January 27 and the introduction of staggered margins based on turnover. In December 2020, the exchange had reduced the margin to 50 percent with no requirement for additional margins.
    "Our estimate of Rs 400 billion ADTV for MCX in FY23E remains realistic on the back of recent tailwinds in the form of a reduction in the crude margin to pre-Covid levels, which has now finally been implemented, and continued volatility in commodity prices,” ICICI Securities said.
    Factoring-in the Rs 360 billion and Rs 370 billion ADTV in Feb’21E and Mar’21E, the brokerage expects MCX to clock a total turnover of Rs 81.2 trillion (down 3 percent over FY20).
    Meanwhile, MCX has awarded the contract for the implementation of commodity derivatives platform to Tata Consultancy Services (TCS) with a letter of intent to the latter to commence the project immediately.
    ICICI Securities noted that the technology-related costs for MCX were comparable to NSE and lower than BSE in absolute terms.
    "Hence, an increase in that overhead is not out of place. A reduction in the cost can be a positive surprise considering technology expense as percentage of revenues for MCX is 18-20 percent vs 1.5 percent for NSE,” it said.
    The brokerage upgraded MCX to Buy from Hold with a target price of Rs 1,746 per share.
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