Mutual funds suffer Rs 275-crore loss in value after MCX stock slumps 10%

With the MCX stock shedding over 10 percent since the issue with 63 Moons broke out yesterday, mutual funds holding the stock of the commodities bourse lost around Rs 275 crore in value.

Around 9.9 lakh outstanding sell orders are pending on the BSE and NSE. No mutual fund, however, holds 63 Moons Technologies Ltd stock, according to data from Value Research.

Around 89 mutual funds held cumulatively 17.31 million shares or 34 percent stake in the company as of May 2023. The aggregate value of these holdings stood at Rs 2,900 crore. These mutual funds include,  ICICI Mutual Fund, Canara Robeco Mutual Fund, Aditya Birla Sun Life, HDFC Mutual Fund, SBI MF, Nippon Life India, Parag Parikh Flexi Cap Fund, among others.

The the Multi Commodity Exchange of India (MCX) stock fell 10 percent to Rs 1477.70, while 63 Moons Technologies surged 16 percent to Rs 251 in the opening hours of June 30. The selling in MCX counter came after it extended the licence and maintenance contract with 63 Moons for six more months.

Despite assurances from the MCX management that the exchange was progressing towards a complete transition to the new trading platform by the end of June, investors were taken aback. The extended contract, spanning two quarters, will incur a cost of Rs 250 crore for MCX, which is nearly 70 percent higher than its net profit of Rs 149 crore for FY23.

Following the expiration of the initial contract with 63 Moons in September, MCX has been facing persistent delays in transitioning to the new platform developed by TCS. Unfortunately, these delays have proven to be financially devastating for the exchange. In the March quarter, MCX reported a minor operating loss due to a significant increase in the costs associated with maintenance and licensing fees paid to 63 Moons.

MCX operates as a marketplace facilitating the trading of commodity derivatives, playing a crucial role in price discovery and risk management. The company enjoys a dominant position in the market, with a market share exceeding 95 percent in terms of commodity trading volume within the country.

With a strong market presence, the company is poised to sustain its leadership position in the industry. Considering the promising long-term growth prospects that outweigh the valuation premium, analysts suggest that long-term investors with a tolerance for risk should accumulate the stock during price declines. A successful transition to the new CDP could serve as an additional catalyst for potential upside, analysts added.