Rocketing gold prices spark rally in Indian exchange to record

By Swansy Afonso and Nupur Acharya

Gold’s eye-popping rally is propelling shares of India’s biggest commodities exchange to record highs.

Multi Commodity Exchange of India Ltd. rallied as much as 5.5% to an all-time high of 1,792.10 rupees in Mumbai on Wednesday, as rocketing prices bolstered expectations that trading volumes in gold futures on the bourse will jump.

Morgan Stanley raised its target for the stock to 2,000 rupees, citing strong balance sheet and high dividend payout.

Gold is on a tear globally on concern of the impact of the coronavirus pandemic on economies, with gains supported by negative real yields and a weaker dollar.

While physical demand for the metal has suffered because of higher prices, investors have poured money into avenues such as exchange-traded funds to benefit from the rally.

MCX, which derives more than a third of its revenue from the precious metal segment, last week reported a 29% jump in the June-quarter profit.

The monopoly commodity exchange is also the best performer on the S&P BSE Finance Index after another gold-linked company Muthoot Finance Ltd.

“Amid tough economic conditions, this is a free cash flow balance sheet-light business with a 90% dividend payout, even as markets worry about debt defaults,” analysts led by Subramanian Iyer at Morgan Stanley India Co. wrote in a note.

They raised their price target from 1,600 earlier.