5 Monopoly stocks trading at a heavy discount in 2022: CDSL, Nestle, MCX, IEX, IRCTC

Is this a good time to invest in these monopoly stocks?

Investing guru Warren Buffet has been a big proponent of investing in monopoly stocks, albeit ones that have a clear competitive advantage and prospects for growth in the future. Of late, even the best monopoly stocks in India have taken a tumble owing to various domestic and international factors.

Here are some of the top monopoly stocks in India that are currently trading at a discount from their 52-week high.

Central Depository Services (India) Ltd (CDSL) 

Market share: 70%

Stock discount: -32%

Of the 90-odd million trading accounts in the country, about 63 million are managed by CDSL. The company earns revenue from Demat account opening and maintenance, transaction charges and corporate/IPO activity.

Future prospects

Less than 4% of Indians actively invest in the stock market, presenting the tremendous potential for growth. The number of Demat accounts opened jumped exponentially during the pandemic, and the trend is expected to continue. Deeper penetration of internet technology and smartphones coupled with a simplified transacting process could be key long-term drivers.

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• Nestle India Ltd (NESTLE)

Market share: 96.5%

Stock discount: -17.5%

Nestle is one of the world’s leading FMCG brands in the health and nutrition segment. The company has been in India for over 100 years and enjoys an absolute monopoly in the baby food segment, while the instant noodles, condensed milk and coffee businesses enjoy 60%, 70% and 50% market share, respectively.

Future prospects

The stock has been under pressure on account of inflation and rising raw material costs. However, it has been a lucrative dividend stock and is poised to deliver double-digit growth over the medium term as per Nomura Investments.

• Multi-Commodity Exchange of India Ltd (MCX)

Market share: 92%

Stock discount: -37%

Established under the Ministry of Finance, MCX is India’s first and largest commodities derivatives exchange. The business facilitates spot and forward contracts on commodity trading. It earns revenue from account opening and maintenance, as well as transaction charges.

Future prospects

In addition to the enormous scale compared to its only competitor NCDEX, MCX has a 100% monopoly in the precious metals, base metals and energy segment. The commodities segment has been severely impacted by the pandemic and the Russia-Ukraine conflict; however, trade volumes across bullion and crude are slowly bouncing back. The introduction of new trading products (index options), regulatory tailwinds, and improved and cost-effective IT infrastructure are expected to drive growth as per a HDFC Securities analysis.

Also Read: What Is MCX And How It Works?

• Indian Energy Exchange (IEX)

Market share: 95%

Stock discount: -45%

IEX is India’s first and largest digital marketplace for energy trading (physical delivery), including retail/commercial electricity, green energy and renewable energy certificates.

Future prospects

The company has been on a consistent growth trajectory for the last five years, and the fundamentals continue to remain strong. As per ICICI Direct, the business is looking to gain further competitive advantage by moving to a Robotic Process Automation that will automate all operations, enhance forecasting models and improve transaction time and experience.

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• Indian Railway Catering and Tourism Corporation Ltd (IRCTC)

Market share: 100%

Stock discount: -49%

Considered as one of the ‘mini Ratnas’, the IRCTC is one of the truest monopoly companies in India. It is the sole provider of ticketing and catering services for the Indian Railways.

Future prospects

The share prices have been gradually declining over the last seven months. The resurgence of the fourth COVID-19 wave could impact ticket sales, while rising energy prices will impact operational costs. The stock is looking weak on the chart and may not be the best bet for the time being as per GCL Securities.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.