Is MCX Really a Monopoly in India’s Commodity Market?

If you trade commodities in India, you’ve almost certainly traded on MCX. That makes it look like a monopoly. But is it really? The answer depends on where you look. India’s commodity derivatives market looks deceptively simple. Almost all the action, whether in gold, silver, crude oil, or copper, happens on one exchange: the Multi Commodity Exchange of India (MCX).

But calling MCX a monopoly is too neat. The reality is more nuanced, and the data tells a fascinating story.

The big picture: India’s commodity market

Let’s step back first. According to SEBI data, the total value of commodity futures and options traded in India has ballooned in recent years, but not evenly.

• Futures turnover has stayed broadly steady since FY18, hovering between ₹60–90 trillion annually.
• Options, on the other hand, have exploded: from just ₹0.1 trillion in FY18 to over ₹500 trillion in FY25.

And nearly all of this activity flows through MCX. The exchange commands 98.8% of India’s commodity futures market, leaving NCDEX with 1.2% and everyone else fighting over crumbs.

In other words: India doesn’t just trade commodities. India trades commodities on MCX.

Where MCX dominates

The dominance isn’t evenly spread across all products. The Commodity Futures Market breakdown shows:

• Precious metals & stones: MCX has 100% market share, making up nearly 75% of its own turnover.
• Energy: 99.97% share, with crude oil and natural gas together contributing ~19% of turnover.
• Base metals: 100% share, but only ~7% of turnover.
• Agri commodities: Here MCX barely exists, just 0.65% share, where NCDEX dominates.

Zoom in on MCX’s turnover mix, and the story sharpens. Gold alone makes up more than half the business (51.7%), with silver adding another 23%. Energy is next, with natural gas at 12.6% and crude oil at 6%, while all the base metals together contribute less than 10%.

In other words, MCX isn’t just India’s commodity monopoly, it is really a bullion monopoly. More than three-quarters of its business is tied to gold and silver.

How dominance shows up in the financials

MCX’s near-monopoly in bullion and energy isn’t just visible in volumes. It shows up just as clearly in its financials.

In five years, revenues have nearly tripled while profits have more than doubled. That works out to about 23% compounded growth in sales and 25% in profits.

But, Sales growth on its own doesn’t reveal much about whether a business has monopoly power, plenty of companies can grow in competitive markets

But the more telling number is the margin: operating margins expanded from 45% in FY20 to 60% in FY25. That kind of margin expansion, on top of already high profitability, suggests MCX has been able to scale without pricing pressure, something you rarely see in competitive markets.

Source: Screener.in

Monopoly, But Not Everywhere

It’s tempting to slap the monopoly label on MCX and call it a day. But there’s nuance.

• In bullion, energy, and metals, MCX is unchallenged.
• In agriculture, NCDEX is still the primary exchange. MCX barely registers with less than 1% market share.

So MCX isn’t an across-the-board monopoly. But where it does dominate, it has built deep moats that make it tough to challenge.

What Keeps MCX on Top?

Three things make MCX hard to dislodge:

1. Network effects: Liquidity attracts more liquidity. Traders go where the action is, which makes it hard for rivals to catch up.
2. Infrastructure advantage: Over 4 lakh tonnes of metals have been delivered through MCX’s warehouses since contracts moved to compulsory delivery. That kind of setup takes years to build.
3. Regulatory moat: SEBI rules, licensing requirements, and strict approvals mean that even if a competitor wants in, the hurdles are high.

What Could Go Wrong?

Even monopolies aren’t invincible. MCX faces a few risks:

• Regulation: SEBI has the power to limit, restructure, or open up new products that could chip away at MCX’s lead.
• Technology: MCX relies on its trading platform and clearing infrastructure. Any disruption or delay in upgrades could dent user trust.
• Competition in niches: NCDEX in agri-commodities is one example. If new players find untapped product niches, MCX could face pockets of competition.

Why It Matters for Traders and Investors

For traders, MCX’s dominance means deep liquidity, tighter spreads, and reliable price discovery in non-agri commodities. But concentration also brings risks: if something shakes MCX, the whole system feels it.

For investors, MCX is treated like a “monopoly stock”, high margins, stable growth, and limited competition. But betting on a monopoly means watching the regulators closely. A single policy shift could change the game.

MCX has also delivered strong returns to investors. Driven by the growth in its business, the stock has provided more than 350% returns over the last five years.

Final Take

MCX is not a monopoly in the strictest sense, but in precious metals, energy, and base metals, it’s as close as it gets. Think of it as a quasi-monopoly: a dominant, profit-rich exchange with strong moats, but still under the watchful eye of regulators and with small cracks where competition can peek through.

For India’s commodity markets, that dominance is both a strength (efficiency, liquidity) and a risk (over-concentration).

Disclaimer

Investments in the securities market are subject to market risks, read all the related documents carefully before investing. The securities are quoted as an example and not as a recommendation. This is nowhere to be considered as an advice, recommendation or solicitation of offer to buy or sell or subscribe for securities. INDStocks SIP / Mini Save is a SIP feature that enables Customer(s) to save a fixed amount on a daily basis to invest in Indian Stock. INDstocks Private Limited (formerly known as INDmoney Private Limited) 616, Level 6, Suncity Success Tower, Sector 65, Gurugram, 122005, SEBI Stock Broking Registration No: INZ000305337, Trading and Clearing Member of NSE (90267, M70042) and BSE, BSE StarMF (6779), SEBI Depository Participant Reg. No. IN-DP-690-2022, Depository Participant ID: CDSL 12095500, Research Analyst Registration No. INH000018948 BSE RA Enlistment No. 6428. Refer https://indstocks.com/pricing?type=indian-stocks; https://www.indstocks.com/page/indian-stocks-sip-terms-and-condition for further details.