Commodity trading is rapidly growing, and understanding the workings of major exchanges like NCDEX and MCX is essential for financial success. This exploration delves into the National Commodity and Derivatives Exchange (NCDEX) and the Multi Commodity Exchange (MCX), revealing their unique operations and market dynamics. Whether you're an experienced investor or new, our analysis sheds light on their different commodities, contracts, trades, settlements, and regulations.
Equipped with valuable knowledge, we guide traders to navigate these exchanges confidently, making informed decisions in the thrilling world of commodity trading. This article explores one of the most common queries investors have: What is the difference between difference between Mcx and Ncdex? But before we dive deep into comparisons, let's first understand the basics of commodity trading.
What Is Commodity Trading?
Commodity Trading means buying and selling various commodities. A commodity refers to any tangible asset, from Crude Oil to Agricultural Produce that can be bought or sold in bulk. Commodity trading involves trading of these commodities along with their derivate products. Thus offering investors a way of diversifying their portfolios beyond traditional ways of investing. Investors need to be aware that commodity trading is a high-risk activity as it involves a lot of speculation.
Commodity Trading is regulated by different exchanges. Some of the major commodity exchanges are:
1. National Stock Exchange (NSE)
2. Multi Commodity Exchange (MCX)
3 . Indian Commodity Exchange (ICEX)
4 . National Multi Commodity Exchange (NMCE)
5 . National Commodity and Derivatives Exchange (NCDEX)
What Is NCDEX?
NCDEX is a specialised commodity exchange and is a pivotal platform for trading agricultural products like wheat, rice, milk, lentils, fruit, and vegetable yields. However, its potential has been concealed due to internal consumption and fragmented local markets. NCDEX emerged to bridge this gap, serving as a centralised arena for national-level agricultural trade. NCDEX plays a vital role in India's flourishing agricultural sector, granting investors direct access to diverse agricultural items and enabling year-round price discovery for sellers.
What Is MCX?
MCX, the Multi-Commodity Exchange started by the government of India, empowers investors with diverse commodities trading opportunities. Amidst the ever-changing demand and supply forces in the Indian financial market, MCX offers a platform for profit-seeking individuals to explore and capitalise on price fluctuations, catering to those with a higher risk appetite.
Difference Between NCDEX And MCX
NCDEX and MCX are commodity trading platforms but differ in their trade process. MCX focuses on precious metals like gold and silver and other industrial metals. Conversely, NCDEX excels in providing favourable investment returns through trading in agriculture-based products. While MCX caters to precious and industrial metals, NCDEX specialises in tapping the potential of agricultural commodities for investors seeking diverse opportunities.
Here are some apparent differences between NCDEX and MCX:
Basis | NCDEX | MCX (Listed) |
Establishment Year | April 2003 | November 2003 |
Promoters | ICICI, LIC, NABARD, NSE | NSEL, BSX, SMX, GBOT |
No. of clearing Banks | 15 | 16 |
Commodities Traded | 34 Agro Products like Oil, Cereals, Oil Seeds etc | 40 Products like precious metals, Gold, Silver, Zinc Etc. |
Commodity Categories | Focuses on Agricultural commodities like oilseeds, spices etc. | Metals, Energy, and Other(including Agriculture commodities) |
Trade Focus | The clear leader in the Agri-based product segment. | Majorly focuses on precious metals, industrial metals and oil futures. |
Listing | Not Listed on any stock exchange |
NCDEX, established in April 2023, focuses on agro-based products among its 34 offerings. In contrast, MCX, founded in November 2003, deals in 40 products, including precious metals and bullion. Their promoters and clearing banks also differ as NCDEX has 15 clearing banks and MCX has 16, providing diverse opportunities for traders and investors in the commodities market.
Financial Comparision between NCDEX and MCX
FY 23-24(Amount in Rs Crores) | NCDEX | MCX |
Revenue | 136 | 684 |
Expenses | 161.2 | 621 |
EBITDA | -25.2 | 63 |
EBITDA Margin % | -18.5% | 9% |
PAT | -27.7 | 83 |
EPS | -5.1 | 16.3 |
We can observe from the above data that the latest NCDEX is not able to recover its expenses and faces a loss of Rs 28 crores in the latest financial year results. For MCX, although the operating profit margin reduced from 28% in March 23 to just 9% in March 24, it has managed to earn a profit of Rs 83 crore from a revenue of Rs 684 crore.
Profitability directly impacts the valuation and shareholder wealth of both these exchanges, which is reflected in the data below:
As on 28-02-2025 | NCDEX Unlisted | MCX Listed |
Market Valuation | Rs 1,215 crores | Rs 25,828 crores |
Share Price | Rs 219 per share | Rs 5,064 per share |
P/E Ratio | N.A.* | 50.4 |
Book Value Per Share | Rs 90.6 | Rs 311 |
*NCDEX is loss-making, hence can’t be accurately reflected in price to price-to-earnings ratio.
Similarities Between NCDEX and MCX
The NCDEX and MCX share several similarities in their operations and functionalities.
A) Headquarters
Both these commodity exchanges have headquarters in Mumbai, India. Their use of cutting-edge technologies facilitates swift and accurate trading for all participants.
B)Trading Time
On weekdays from Monday to Friday, NCDEX and MCX provide an accessible online trading platform that members can utilise through a computer-to-computer link (CTCL) and trader workstation connected via VPN, VSAT, leased lines, and the internet.
C) Standardised Contracts
One fundamental similarity between the two exchanges is that they deal in standardised contracts. This means that the lot size, commodity quality for delivery, and expiry dates are pre-defined and uniform across the board.
D) Transaction Execution
To ensure a secure trading environment similar to the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), both MCX and NCDEX execute transactions through clearing corporations. This setup effectively eliminates counterparty risk, instilling confidence in traders.
E) Margin Trading
Both MCX and NCDEX permit trading on margins, enabling traders to take larger positions in the market with a fraction of the required capital. This leverage can amplify potential profits but entail more significant risk, as losses can similarly be magnified.
Which is better, MCX or NCDEX?
Although NCDEX has a lower valuation than MCX, NCDEX stands out as the better option for commodity trading. With its convenient market timings, offering extended hours for internationally linked Agri commodities like Cotton and CPO until 9:00 pm, NCDEX provides traders with more opportunities to capitalise on market movements.
As a result, NCDEX emerges as a more versatile and advantageous platform, making it the preferred choice for commodity traders seeking a reliable and flexible trading experience. You can also buy NCDEX unlisted shares online for great returns on your investment.
FAQs
What is the function of NCDEX and MCX?
Regarding trading commodities in India, the top names are MCX and NCDEX. Both of them function similarly to stock exchanges, with the exception that they deal in commodities rather than stocks and stock indexes.
Is NCDEX private or government?
It is a government-owned corporation established on April 23, 2003, per the Companies Act of 1956, and received its certificate for the start of operations on May 9, 2003. It started running on December 15, 2003.
What comes under NCDEX?
The National Commodity and Derivatives Exchange, often known as NCDEX, is one of India's top commodity exchanges. It specialises in trading various agricultural commodities, including grains, spices, oilseeds, pulses, metals, and energy goods.
What is NCDEX Trading?
The National Commodity and Derivatives Exchange, often known as NCDEX, is one of India's top commodity exchanges. It specialises in trading various agricultural commodities, including grains, spices, oilseeds, pulses, metals, and energy goods.
What is NCDEX market timing?
NCDEX market timings for Agricultural (Agri) commodities are from 9:00 am to 5:00 pm with an auto square off timer at 4:30 pm. For Internationally linked Agri commodities, the market operates from 9:00 am to 9:00 pm with a square off at 8:30 pm. Other commodities like Gold, Silver, Crude, etc., trade from 9:00 am to 11:55 pm, with a square off at 11:25 pm.
