IEX shares tumble 23% in 2 sessions. What's behind the fall & how to trade stock now?

Indian Energy Exchange (IEX) shares tanked 15% to their 52-week low of Rs 116 on NSE in Friday's trade on the back of the Ministry of Power’s (MoP) decision to go ahead with market coupling. In two days, the stock has lost nearly 23% as it declined over 8% on Thursday.

A market coupler implies that an independent third-party will collate all buy/sell bids and derive a uniform market price across all exchanges.

Brokerage firm Nuvama has called this a “big negative for IEX” and recommended a ‘Reduce’ rating on the counter. It has a price target of Rs 127 on the stock.

Currently, IEX is the most trusted platform for electricity spot price determination in India, which is its business moat, Nuvama said in a note. It added that the MoP has already directed CERC to expedite the consultation process and finalise the implementation of market coupling.

Market coupler collects all buy and sell orders from all the power exchanges, which is then aggregated and matched to discover a uniform market clearing price, across all exchanges regardless of platform, the brokerage firm explained.

The newly-launched ancillary market from April 2023 has NLDC acting as the market coupler for a very small portion of the market, but this was the beginning of NLDC moving into a full-fledged market coupler role, the note further said.

The stock has declined 28% over a 12-month period, underperforming the Nifty50 index which has given 14% returns in the same duration, Trendlyne data showed.

Market expert Sandip Sabharwal advised investors to avoid this stock, calling it cyclical in nature. Government intervention on top of it has made the story even more sour, he added.

On MoP's decision, Sabharwal said it was always a challenge buying stock of companies which are prone to government interventions as they bring about huge swings in profitability. It is a challenge that all OMC stocks also face, Sabharwal added.

IEX achieved an overall volume of 8,251 MU in May which was up 8% year-on-year (YoY), the company informed on Monday in a filing to the exchanges.

The market clearing price stood at Rs 4.74 per unit, which was lower by 30% YoY. The exchange filing also claimed IEX maintained a 100% market share in collective transactions.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)