IEX shares nosedive amid market coupling fears

Indian Energy Exchange (IEX) shares suffered heavy losses on January 17 amid market-wide weakness. Here's what has investors worrying.

IEX operates a nationwide automated trading platform for the physical delivery of electricity, renewables and certificates. | Representational image | Image credit: Reuters

Indian Energy Exchange (IEX) shares suffered steep losses amid market-wide weakness on Wednesday. IEX shares tumbled by as much as Rs 18.7, or 11.4 per cent, to Rs 145.4 apiece on BSE after Union Power Minister RK Singh said in an exclusive interaction with Zee Business that market coupling—or a uniform market clearing price for buyers and sellers in all exchanges operating in an area—will be implemented soon. According to analysts, investors feared the implementation of market coupling of power exchanges that would impact IEX, which enjoys a share of 90 per share in total market volume.

The IEX stock finished the day with a loss of 10.2 per cent at Rs 147.3 apiece on the bourse.

According to Zee Business research, the market coupling mechanism poses a threat to Indian Energy Exchange's business in the day-ahead market (DAM) and real-time market (RTM) segments. Currently, around 94 per cent of spot market transactions take place on IEX.

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With the introduction of market coupling, the power exchange would lose its monopoly and the status of the most trustworthy exchange for price discovery. In the worst-case scenario, the volume share of DAM/RTM segments can fall to as low as 33 per cent from 100 per cent, according to Zee Business analysts.

The Central Electricity Regulatory Commission, the country's power regulator, mooted the concept of market coupling in 2020.

The power ministry in June directed the regular to initiate the process of market coupling, after which the regulator floated a paper on the subject in August, inviting comments from various stakeholders.

Most stakeholders consulted by the CERC, including generators, distributors and consumers, opposed the introduction of market coupling for power exchanges.

IEX shares: Past performance

IEX shares have declined about one per cent in the past month, underperforming a one per cent rise in the headline Nifty50 index.

In 2023, the stock rose 19.9 per cent, in line with the market benchmark's 20 per cent gain.

What is market coupling?

Market coupling is a mechanism to aggregate and match buy/sell bids from all power exchanges in the country to discover a uniform market clearing price (MCP) for the day-ahead or real-time markets. Simply put, market coupling will lead to only one price for power to be traded at any point of time through all the exchanges in the country. Read more on market coupling here

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