Why Are IEX Shares Falling? Is Market Coupling to Blame Again?

Shares of Indian Energy Exchange nosedived 10% on June 11 amid buzz that Power Minister Manohar Lal was planning to meet stakeholders to consult and apprise parties of the benefits of market coupling. The news brought back fears of market share loss for the country’s biggest power exchange, if market coupling is brought into action.

A report from CNBC-TV18, citing sources, claimed that the Power Minister was planning on carrying a meeting with all stakeholders to discuss the benefits of market coupling. The report further suggested that when market coupling is implemented, it will happen through a common or broad bidding system and not through any internal bids by individual exchanges.

In simple terms, market coupling refers to the process where all buy and sell bids from different power exchanges are aggregated and matched together, leading to a single, uniform price for electricity at any given moment across platforms. This aims to bring more transparency and efficiency to electricity price discovery in the country.

If implemented, market coupling takes away the advantages of one power exchange over the other, equalizing prices across the board.  In simpler terms, power exchanges will be reduced to only be a platform to buy and sell bids will be received. That threatens to eat away market share of Indian Energy Exchange, which commands the lion’s share of India’s power exchange market. These concerns have rattled investor sentiment, firing up a selloff in shares of Indian Energy Exchange.

Trading volumes in the counter also shot up sharply as seven crore shares of IEX exchanged hands thus far, reflecting a meteoric spike from the one-month daily traded average of 90 lakh shares.

Worries over the implementation of market coupling have also kept investors at an arm’s distance of Indian Energy Exchange shares in the recent past. To that effect, the stock has just delivered a mere 7% returns in the past one year.