NSEL effect: Institutional players continue to trim MCX holding

Written by fe Bureau | Mumbai | Updated: Jan 15 2014, 07:11am hrs
NSELInstitutional investors trimmed their holding in the MCX for a second consecutive quarter after the R5,600-crore scam emerged at its group company, NSEL. Reuters
Institutional investors trimmed their holding in the Multi Commodity Exchange (MCX) for a second consecutive quarter after the R5,600-crore scam emerged at its group company, National Spot Exchange (NSEL).

During the three months to December 2013, foreign institutional investors (FIIs) reduced their MCX ownership by 11.6% to 25.2%, while domestic institutional investors (DIIs) pared their stake by a moderate 0.9% to 14.3%.

Among institutional investors, Europe-based NYSE Euronext that held 4.73% in MCX as of September 20,2013, seems to have liquidated most of its holding in the commodity derivative exchange. The global exchange does not feature among the list of investors who own more than 1% stake in MCX as of December 31, 2013. In mid-December, Euronext had sold 5.65 lakh shares of MCX through open market operations.

Even the Government of Singapore Investment Corporation and Swiss Finance Corporation, each of which held a 1.24% stake in the previous quarter, are absent from the list of investors who own more than 1% post the latest quarter.

Among FIIs, the larger foreign corporate bodies contributed the most to the exits, with their collective stake in MCX coming down to 7.54% in the December quarter from 15.23% in the previous quarter.

DIIs that sold nearly 4.8% of their stake in MCX during the September quarter reduced their possession by a moderate 0.9%. Corporation Bank, which diluted its stake by 0.71% last quarter, further brought down its ownership in the exchange by 0.14% to 2.1%.

During the September quarter, DIIs were more aggressive in exiting MCX shares. The noticeable exits came from the National Stock Exchange (NSE) and Reliance Capital, which parted with their stakes of 2.45% and 1.27% respectively. Bank of India and Union Bank each sold their 1.03% of ownership in the exchange.

Meanwhile, Religare Finvest as well as CLSA (Mauritius) bought into MCX shares during the quarter as their holdings now stand at 1.92% and 1.26%, respectively. Domestic individual investors remained quite interested in the MCX stock. The total stake of individual investors that own share capital of up to R1 lakh went up by 2.5% to 12.9%.

Going ahead, the commodity market experts expect the institutional shareholding of MCX to improve citing the latest order by Forward Markets Commission (FMC), which deemed the Financial Technologies (FTIL) as not fit and proper to act as an anchor investor of MCX.

The order effectively means that FTIL needs to reduce its stake in MCX from 26% to 2%. In the recent past many domestic institutions, including Universal Commodity Exchange (UCX) and bullion body Bombay Bullion Association (BBA), have shown interest in buying the FTIL stake in MCX. In the first week of January, Blackstone GPV capital partners which already owned 2% in MCX bought an incremental 2.79% stake in the exchange from Merrill Lynch that exited its holding in MCX.