you can read the below reviem of MCX posted at safal niveshak website
Financial Technologies is down a whopping 60% today due to suspension of contracts on NSEL due to some regulatory issues .
Some more details available on this reuters news report
don’t actively track this so still trying to figure out if the fall is justified . it would be helpful if anyone on the forum familiar with the stock can share their thoughts whether this is a short term setback
No offence intended but most of the stocks analsysed at Safal Niveshak are wrong
For eg. MCX is down almost 40% from Safal Niveshak’s reccomended price after 30% Margin of Safety.
Performance of Opto Circuit is also well known. Same with Bharti
TCS is up 20% after Safal Niveshak recommended not to buy it.
I do not doubt the intention and approach, but obviously something is wrong. Do we have a lesson here.May be we can use the lessons at valuepickr
Not only that. Most of the stocks with big margin of safety are down 20%-50%. BHEL, Engineers India, Tata Steel, Voltas,Clariant Chemicals,Balmer Lawrie,Graphite India,etc. The stock that has performed really well are Cera sanitaryware and LT but then it was recommended not to buy both nor the price ever came. Only 1 performed (Infy) and 7 down.
Analysis was good but This is a pitfall of a value investor. Cheap things might become more cheap and remain so for long time to come. They don’t buy so called fairly valued stocks even when growing 25% cagr but can wait with cheap stocks for 5-10 years. it’s personal preference.
those who want to know what is going on with MCX and FT may find the following article interesting:
would valuepickrs call this a problem with promoter integrity? If yes than there is no use investing in FT/MCX since this violates the basic tenets of valuepickr
**As of now there is nothing to say it is problem with promoter integrity. One of the main issues here is a futures product which was introduced in NSEL which the govt did not like. Negotiations regarding the product have been going on for the past one year or so, according to media reports. So it is not a sudden discovery of any fraud etc. ****The commodities market does not have very clear regulations and guidelines in place. You can think of it as FT tried to exploit it legally, but failed. ****The sudden withdrawal of the product has caused a liquidity crisis, and in the event that the value of the physical-commodities is much less than outstanding contracts, it will also be a solvency crisis. From FT’s viewpoint, it is loss of 50%+ revenues. FT may also loose around 40% revenues on what is left due to CTT (the picture in July has just became clearer). That straight away takes care of 70% drop in FT from its highs. Add to this de-rating, mass exodus of institutional investors and you dont know where it will stop. I am not going to touch FT at all. Its business is anyway too complex to understand for me.
**As far as MCX is concerned, it is not very clear to me why the stock is droppingand what market fear about MCX is about. Even if NSEL defaults, it has no direct bearing on MCX. However as mentioned above CTT has caused a drop of 40% volumes in MCX this july. So expect Q2 results of MCX to read something like 50% drop in net profit or worse. CTT explains the continuous drop from high of 1500+ to 600 levels.
**Note that MCX has around Rs. 180 cash equivalents per share (excluding the warrants/stake in MCX-SX). So even assuming 50% drop in trading volumes due to CTT and some drop in margins, the price starts to become very attractive below 300-350 level. However, I would wait until the picture becomes clearer and price consolidates. **
I came across the following article which now points to issues related to promoter integrity.
Agree on what you said except that some of the cash on MCX books is advances from brokers & clients… Which you cant assume to be belonging to MCX shareholders.
So actual cash of MCX is much lesser…
As ** droppingand **** about. **
Safal Niveshak is excellent in analysis, absolutely no doubt about it. But the track record on reaching conclusion from those analysis is not so good. I remember his excellent analysis of Cera and then recommending not buy buy it at the end. As usual Cera gave excellent return at the price at which he told not to buy it.
I feel one should do detail analysis like Vishal does for the stocks, but at the end try to emulate seniors like Hitesh/Donanld/Ayush/Hemant,… when reaching conclusion.
At the end I really appreciate Vishal’s effort in educating small investor. He has done an excellent job in it.
Straight from the indian value investing guru’s mouth.
I think as individual investor’s we should try and avoid very complicated business unless they have been around for few decades have extremely good reputation etc etc… like say HDFC Bank (i consider banking as complicated business too) … Only growth in results should not be enough reason to get invested.
For some reason, MCX & FT have have always put me off from even doing a preliminary analysis, as i find it very difficult to fathom what they do…
Again, just steep fall from previous high’s in a small time is also no reason to get invested…
Do your homework well opportunities are plenty. A miss won’t hurt much, but investing in a probable dud might.
Multi Commodity Exchange of India Ltd has informed BSE as under :
"In response to the media queries, Mr. Shreekant Javalgekar, Managing Director & CEO has clarified that Multi Commodity Exchange of India Limited (MCX) and National Spot Exchange Limited (NSEL) are totally different entities with no financial commitments or exposure to each other whatsoever. MCX is an extremely sound regulated entity. It has a strong debt-free Balance Sheet with a networth in excess of Rs. 1200 crores as on June 30, 2013.
For the year ended March 2013, it reported a net profit of 298.64 crores and for the quarter ended June 2013, it has reported a net profit of Rs. 60.12 crores."
a person familiar with nsel claimed that mcx is the exchange on which nsel used to run. legally they may be different though.
be careful with such announcements.
keep in mind nsel ceo’s announcement on aug 1 which said there is nothing to worry, there is 6200 cr stock and also 800 cr settlement guarantee fund, etc. 2 days later we find there is no evidence of stock and the fund had dwindled to 60 cr.
I have always wanted to buy MCX before this NSEL crisis, and for the past one week have been reading a lot and debating whether this is a right time and whether this constitutes an investment given the current issues with promoter integrity. I have decided in its favor and here I share some reasons:
1). the prices in nsel of contracts used for financing scam, have had a very particular pattern. I tried to find similar patterns in all contracts of MCX, but did not find any.
2). MCX has no exposure NSEL.
3). The volumes in MCX remain normal if one believes online data and although no guarantee, there are some reasons to believe that the online data is not completely off.
4). Even if promoters are liars, cheats, MCX is regulated by FMC. For e.g. in wake of this crisis, FMC has ring-fenced MCX, preventing it from giving any loans or diverting funds to other companies. It is very likely that the 800cr cash is still on books, although this is not the sole reason for investment.
There are many if’s here. But the price is such that lot of ifs are discounted.
Will the market cap go to zero if promoters mess up badly? The bet here is not on the promoters honesty, but on their intelligence. They are mainly into exchange business and they will be the biggest losers if MCX does not survive.
The main reason for taking MCX seriously is the easily scalable business model which has network advantage, comparable to ebay amazon etc. Such companies are very hard to find as I read in a book by PAT DORSEY.
am I on my way to paying tution fees to the market? I could never know it in advance.
…and what happens if tomorrow MCX shuts down like NSEL (due to a fraud/mis-management). Can you trust the promoter.
There is only One Big Rule…Dont buy a stake in a business , where the promoter is not trust-worthy. Eventually he will siphon off your money.
“Woh exchange hi kis kaam ka, jo settlement ensure na karwa paya.”
If there were willing buyers and willing sellers in the NSEL saga, then why is there so much of default…There was mis-management and eventually for this very reason there will never be a re-rating of the business.
MCX hasnt taken off in a big way anyways, and now with this saga, it never will.Sooner or later, EPS will also fall.
I would strongly suggest staying away. The basic prinicple of an investment is Guarantee of Return of Capital first, and a suitable return on capital thereafter. I don not see, both of it appearing here
"MCX - Trade with trust "
the trust has already gone out of the window.
If there were dummy stocks in the warehouse which seems to be the case in NSEL, this amounts to fraud and it cant happen without the knowledge of mgmt.
Investing now is akin to gambling. It may swing either side.
Manish, There is crisis in MCX that is why stock is down at this level, otherwise why a stock trading at 800 few weeks back trade below 300. There is some companies which moves beyond promoters credibility and i guess MCX is one such company. It is not easy for people to change their commodity trading platforms over night and FT holds only 26 % stakes here, so their influence on MCX is limited. Also whole issue at NSEL is related with agri commodity trading where share of MCX is still below 5 % and in other metal trading segments like gold, silver, copper, oil, natural gas etc chances of such problems is negligible owning to nature of commodity. Govt and regulatory authority ensure that MCX platforms run smoothly because otherwise it can affect NSE/ BSE stock exchange also.
(DISC: I have taken small position in MCX)